Top Investors Are Buying These Companies
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Despite a weak economic recovery in the US, a recession in Europe, and decelerating growth elsewhere (notably in emerging economies China, India, and Brazil), the S&P 500 has rallied 12% since early June. Global monetary policy enabled the market to overcome these headwinds and I think the global rally could resume its past uptrend from the current short term correction. In this report I highlight 5 stocks that have lagged their peers or the market this year and where I see specific catalysts that could propel them to catch up in coming months. In addition, I detail which prominent hedge fund managers bought these stocks in the recent quarter. In the blog Warren Trades, we profile these kinds of stocks and provide alerts when to buy or sell them.
The first one is Anadarko Petroleum (NYSE: APC). The stock has three clear positives: an outstanding upstream portfolio taking into consideration the company's giant gas discoveries in Mozambique, domestic liquids-rich growth opportunities in the DJ Basin, and a potential exploration upside. Top investors T. Boone Pickens, Richard Perry, George Soros, Ken Heebner and John Burbank bought the stock last quarter. I am encouraged by the company success in Wattenberg. Anadarko shares could appreciate considerably as soon as the company starts monetizing some parts of its Mozambique discovery. According to Credit Suisse, the stock is trading at a 30% discount to its valuation price of $107/share. I think that Anadarko shares could start a material uptrend as soon as the company starts announcing the monetization of its recent Mozambique discoveries.
Constant Contact (NASDAQ: CTCT) is the second stock to focus on. Top institutional buyers Citadel, Fidelity, and Tudor bought the stock in the recent quarter. The company is transforming itself from just an email marketing solutions to a multichannel marketing platform vendor with new products for its large installed base of 525,000 customers. Considering that over 70% of its 525,000+ small business customers have less than 10 employees, the US economy keeping its recovery momentum could be a positive catalyst for Constant Contact shares. In fact, I am encouraged by the fact that the Small Business Optimism Index from the National Federation of Independent Business (NFIB) continues to trend higher from its low of 81 in March 2009, which suggests a steady improvement in the small business owner outlook over the last 42 months. Constant Contact could be a solid US recovery play.
Deere (NYSE: DE) is another stock that could keep its current rebound. As prices of food commodities have increased considerably in 2012, farmer income is strong. It is important to remark that farmer’s investments are highly correlated with high corn and soybean prices. I expect that concerns over the US drought will reduce and Brazil or China will continue to surprise on the upside. The company is fundamentally solid and has been bought by prominent investors Scott Black and Ray Dalio in recent quarters.
Enbridge Partners (NYSE: EEP) is an investment grade rated company but the stock yields over 7.5%. EEP has disappointed in the past considering that its recent pipeline ruptures raised operational questions. According to Credit Suisse, the market has not taken into consideration that EEP is spending $300M to upgrade older pipelines and is allowed to get a return on what would normally be maintenance capex. Value investor John Keeley initiated a position in EEP last quarter.
The last stock to focus on is Fusion-io (NYSE: FIO). The most important thing from this company comes from its recent big new client accounts. I think the market has not taken into consideration that these big clients (Salesforce, Pandora, Chinese companies) can drive multiple revenue streams and increase Fusion-io brand value. The company also made strategic partnerships with Cisco and NetApp that could broaden Fusion-io sales channel. This shows evidence that there is an increasing acceptance of Fusion-io’s competitive strength. In addition, if Intel launches its next generation servers that event will add Fusion-io potential for a higher addressable market and excitement about the company’s roadmap. Top investor David Tepper from Appaloosa Management initiated a position in the stock. Tepper bought 268,075 Fusion-IO shares at an average price of $23 in the second quarter of 2012.
In conclusion, I think that every investor should take into consideration each stock current fundamentals and the catalyst that could create a potential uptrend. Not only I track fundamentals but also I keep an eye on the stock's technical picture in order to improve my timing and buy when I have clear evidence that institutional investors are also doing so. I like to recommend when to buy or sell the stocks I am currently analyzing.
martinzaldua has no positions in the stocks mentioned above. The Motley Fool owns shares of Fusion-io. 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.If you have questions about this post or the Fool’s blog network, click here for information.