DSAM Partners Likes These 5 Stocks, Should You?

DSAM Partners, a London based fund founded by Guy Shahar with an equity portfolio of $218 million, has recently filed its 13F filing for the third quarter. Given that elite funds typically perform in depth research and have the best and brightest working for them, let’s take a look at DSAM’s top stock picks: Fiat Chrysler Automobiles NV (NYSE:FCAU), Amazon.com, Inc. (NASDAQ:AMZN), Kite Pharma Inc (NASDAQ:KITE), Walgreens Boots Alliance Inc (NASDAQ:WBA), and Activision Blizzard, Inc. (NASDAQ:ATVI).

But why do we track hedge fund activity? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect their activity. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period hedge funds’ top small-cap stocks edged the S&P 500 index by double digits annually. The 15 most popular small-cap stock picks among hedge funds also bested passive index funds by around 53 percentage points over the 36 month period beginning from September 2012 (see the details here).

#5 Kite Pharma Inc (NASDAQ:KITE)

Shares held (as of September 30): 265,640
Total Value (as of September 30): $14.79 million
Percent of Portfolio (as of September 30): 4.38%

Nine analysts have a ‘Buy’ rating, and two have a ‘Hold’ rating with a consensus price target of $87.89 per share on novel cancer immunotherapy company Kite Pharma Inc (NASDAQ:KITE). Not to be left out, the elite buy-side funds are optimistic too. Of the around 730 elite funds we track, 22 funds owned $384.4 million of Kite Pharma’s shares at the end of September, versus 22 funds and $276.86 million respectively on June 30. Shares are up over 22% year-to-date so far.

#4 Amazon.com, Inc. (NASDAQ:AMZN)

Shares held (as of September 30): 37,744
Total Value (as of September 30): $19.32 million
Percent of Portfolio (as of September 30): 5.73%

Amazon.com, Inc. (NASDAQ:AMZN) shares continue to amaze, as shares have more than doubled this year on the back of the company’s fast growing Amazon Web Services division and Amazon’s sticky Prime membership. Given the division’s fast growth, healthy margins, and dominance over the infrastructure as a service market, experts estimate Amazon Web Services could be worth in excess of a hundred billion dollars in a few years (if it isn’t already). Meanwhile, Amazon Prime makes Amazon the starting point in many e-commerce related searches, providing Amazon with an opportunity to sell more of its millions of products every day.

#3 Fiat Chrysler Automobiles NV (NYSE:FCAU) is

Shares held (as of September 30): 190,000
Total Value (as of September 30): $22.15 million
Percent of Portfolio (as of September 30): 6.56%

After having successfully spun off Ferrari NV (NYSE:RACE), Fiat Chrysler Automobiles NV (NYSE:FCAU) reported solid third quarter earnings with EPS of 0.20 euros on revenue of 27.47 billion euros. That’s roughly $0.22 in EPS on revenue of $30 billion in dollar terms. Shares of the company have done well this year, with FCAU stock up 21.24%, on the back of good earnings results and improving sentiment. There could be more upside, as analysts have a price target of $16.55, giving FCAU a 17% upside. Cliff Asness’ AQR Capital Management owned 5.95 million shares at the end of the third quarter.

#2 Activision Blizzard, Inc. (NASDAQ:ATVI)

Shares held (as of September 30): 1.11 million
Total Value (as of September 30): $34.31 million
Percent of Portfolio (as of September 30): 10.17%

DSAM Partners raised its holdings in Activision Blizzard, Inc. (NASDAQ:ATVI) by 36% to 1.11 million shares, good for 10.17% of the fund’s portfolio. Activision Blizzard recently has beaten both top and bottom line expectations for its third quarter, with EPS of $0.21 on revenue of $1.04 billion. ATVI also has announced it will acquire King Digital Entertainment PLC (NYSE:KING), the maker of the popular Candy Crush series, in a move that will beef up Activision’s mobile presence. Stephen Mandel’s Lone Pine Capital owned 9.29 million shares at the end of September.

#1 Walgreens Boots Alliance Inc (NASDAQ:WBA)

Shares held (as of September 30): 449,147
Total Value (as of September 30): $37.32 million
Percent of Portfolio (as of September 30): 11.06%

Walgreens Boots Alliance Inc (NASDAQ:WBA) is DSAM Partner’s largest equity holding, as the fund more than doubled its position in the pharmacy chain in the third quarter to 449,147 shares. Walgreens Boots Alliance benefits from an aging U.S. population, in which almost 10,000 Americans turn 65 every day, as older Americans consume more medicine. WBA also benefits from biotech breakthroughs made by other companies, as new discoveries for cancer, diabetes, hepatitis, etc. lead to more sales for Walgreens. Shares currently trade at a reasonable 16.89 times forward earnings, lower than the S&P 500’s forward multiple of 17.44.

Disclosure: none