Hedge Funds Are Snapping Up These Stocks
Meena is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The most up-to-date publicly available information on hedge funds comes from 13D and 13G filings, which take place shortly after a fund or other institutional investor owns over 5% of a stock’s outstanding shares (or makes changes to that position at a later date), in addition to any other public disclosures made by the funds themselves or the company involved. We don’t recommend that every single investment by a hedge fund be copied- that’s not possible anyway- but we think that it’s advantageous to use these investors as free sources of investment ideas that can be used or rejected at will. Here are five stocks that we have seen hedge funds buy recently:
The specifics aren’t clear, but reports from Transocean (NYSE: RIG) are that Carl Icahn has bought a significant number of shares and is looking to buy as much as 3% of the company. This wouldn’t require a 13D or 13G filing- but then again, Transocean is a $20 billion market cap stock and so even a 3% stake would make the company one of Icahn’s largest holdings. Find more of Icahn's favorite stocks. Wall Street analysts are bullish on Transocean: the stock trades at 10 times consensus earnings for 2013 and the five-year PEG ratio is 0.5. We are a bit concerned, however, that high onshore production will keep oil prices low and reduce demand for the company’s offshore drilling services.
Billionaire Paul Singer’s Elliott Management has continued to buy shares of Compuware (NASDAQ: CPWR) and now owns 9.2 million shares of the stock; the fund had 5.7 million shares in its portfolio at the end of September (check out more stocks Elliott owned). Compuware’s revenue and earnings were down over 10% in its most recent fiscal quarter versus a year earlier, and the trailing P/E is 35. Elliott has publicly offered to purchase the company, though the stock price has overtaken their original offer of $11 per share and this may be due to the possibility of a bidding war emerging for Compuware.
Royce & Associates, a fund managed by Chuck Royce, now owns 1.1 million shares of Marten Transport (NASDAQ: MRTN) giving it just over 5% ownership of the company (see more of Royce's stock picks). Marten is a trucking company with a focus on time- and/or temperature-sensitive transportation, and gets a sizable portion of its business from transporting food products and chemicals. Revenue and earnings growth have been moderate, and when we look at Marten’s cash flow we see that- partly because of a lack of long term debt- the EV/EBITDA multiple is only 4.1x. This is a fairly low valuation for a trucking company and so we can see why a value investor would want to take a closer look.
Eric Bannasch’s Cadian Capital Management has reported a position of 3.1 million shares in LogMeIn (NASDAQ: LOGM), a software company primarily engaged in remote access functions. Cadian now owns over 12% of the company, after having more than doubled the size of its position from its 13F filing from the end of September. Earnings have been up, but this has been due to lower sales and marketing expenses; revenue has actually declined. In addition, we think that the stock may be priced too high for new buyers at 29 times this year’s expected earnings.
Perceptive Advisors, a healthcare focused hedge fund managed by Joseph Edelman, has been adding to its position in Aegerion Pharmaceuticals (NASDAQ: AEGR), where it was already a major shareholder. The most recent report has the fund at 3.2 million shares. Aegerion is a $690 million market cap (with plenty of dollar volume) development stage pharmaceutical company. As might be expected, it is expected to be unprofitable this year. 13% of the outstanding shares are held short, even though the stock has risen considerably in the last year.
This article is written by Matt Doiron and edited by Meena Krishnamsetty. They don't own shares in any of the stocks mentioned in this article. The Motley Fool owns shares of Transocean. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!