Five Stocks Capturing a Lot of Attention from Hedge Funds

While the likes of Allergan plc Ordinary Shares (NYSE:AGN) and Alphabet Inc (NASDAQ:GOOGL), constantly make the headlines and especially after the release of the hedge funds’ 13F filing, some stocks tend to slip under the radar, despite a surge in interest from top hedge fund managers. Warren Buffett‘s big bet on Apple Inc. (NASDAQ:AAPL) was analyzed from every angle, but what other stocks have registered the largest increase in the number of long hedge fund positions? Let’s find out.

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).

Apple Again

Despite worries about its ability to maintain the growth rate of its leading products, Apple Inc. (NASDAQ:AAPL) attracted a number of new long positions from top hedge funds. Among the funds tracked by Insider Monkey, 152 have reported a stake in the tech giant at the end of the first quarter, up from 133 a quarter earlier. Berkshire Hathaway’s $1.06 billion bet on Apple made headlines for two reasons. First, Warren Buffett doesn’t usually invest in tech stocks and in this case it seems one of his lieutenants made the move, with Buffett’s consent of course. Secondly, long term fan and supporter of Apple, Carl Icahn dumped his entire position during the quarter. Only time will tell who made the right call. Apple Inc. (NASDAQ:AAPL) has recently announced a $1 billion investment in Didi Chuxing Technology Co, China’s response to Uber. Although Apple did not offer a rationale for its decision, it is possible that the investment is set to complement the company’s efforts to enter the car market, with reports circulating that Apple is working on an autonomous electric vehicle.  Uber has also shown interest in self-driving vehicles, while General Motors is preparing to test a fleet of self-driving taxis.

Healthcare Merger Play

A diversified healthcare company, Centene Corp (NYSE:CNC) was also among the stocks that attracted a large number of new bets. At the end of the first quarter, 47 elite funds reported long positions in the stock, up from 27 at the end of the fourth quarter of 2015. Harris Associates, run by Natixis Global Asset Management, established a fresh position and acquired roughly 1.99 million shares of Centene Corp (NYSE:CNC) during the quarter. The stake is reportedly worth $122.8 million and is the largest among the funds followed by Insider Monkey. So far this year, the stock has been trending sideways, hovering around the $60 level. The company’s mixed first quarter results did not help either. Revenues rose by 36% year-over-year to $6.95 billion, but were below analysts’ estimate of $7.28 billion. Centene Corp (NYSE:CNC) also reported a profit of $0.74 per share, one cent above the consensus.

The popularity of ADT Corp (NYSE:ADT) registered a major boost during the first three months of 2016, as elite hedge fund ownership grew to 18.3% of the company’s outstanding stock. Of the funds followed by Insider Monkey, 52 reportedly held a long position, up from 24 at the end of December. Thomas Steyer’s Farallon Capital that initiated a stake in the company during the quarter, having amassed 1.45 million shares valued at a little over $60 million as reported in the fund’s latest 13F filing. A provider of home and business security systems, ADT Corp (NYSE:ADT) was acquired by Apollo Global Management, a private equity firm, for $6.9 billion or $42 a share. Apollo Global had previously acquired two other security firms and plans to merge all three companies into one single entity, that could generate annual revenues in excess of $4.2 billion.

REITs Are Still Hot

At the end of March, 59 of the funds in our database had Gaming and Leisure Properties Inc (NASDAQ:GLPI) in their equity portfolio, almost double compared to the previous quarter. Joshua Friedman and Mitchell Julis’ fund, Canyon Capital Advisors, bought exactly 1 million shares of Gaming and Leisure Properties Inc (NASDAQ:GLPI), a stake worth $30.9 million at the end of the quarter. At the end of April, the real estate investment trust posted first quarter results that exceeded Wall Street’s expectations. Gaming and Leisure Properties Inc (NASDAQ:GLPI) said it had funds from operations of $83.6 million or $0.70 per share, while analysts had projected $0.69 per share. Revenue stayed flat at $148.8 million, in line with expectations. The company is valued at $4.78 billion and pays an annual dividend of $2.19 per share, providing investors with a juicy 6.7% yield. The stock ended yesterday’s trading session at $32.74 per share, up by 19% for the year.

Numero Uno

Hedge fund ownership of Baxalta Inc (NYSE:BXLT) grew the most during the first quarter, reaching 83 long positions and 22% of the common stock. A quarter before, only 50 top hedge fund had this stock in their portfolio. Eric Mindich’s Eton Park Capital was among the funds sought a taste of Baxalta Inc (NYSE:BXLT), having bought some 11.9 million shares worth $482 million according to the fund’s latest 13F filing. Baxalta was spun off Baxter International Inc (NYSE:BAX) in July 2015, only to reach merger deal with Shire PLC (ADR) (NASDAQ:SHPG) six months later. The Irish drug maker has agreed to pay $18 in cash and 0.1482 of its American depository shares for each Baxalta Inc (NYSE:BXLT) share. Both companies have recently stated their intent to finalize the deal despite the US lawmakers breaking down on cross-border mergers that aim to reduce the tax bills of the US-based corporations.

Disclosure: none.