The most comprehensive picture of what hedge funds own comes in the form of quarterly 13F filings with the SEC, and these filings provide the core of the information we use to develop investment strategies. For example, our research shows that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year (learn more about our small cap strategy) and our own portfolio based on these techniques outperformed the S&P 500 by 33 percentage points in the last 11 months. We can also get more up to date information about large hedge fund buys in small-cap and mid-cap stocks (as well as the occasional large cap) from 13D and 13G filings, filed whenever a fund buys over 5% of a company’s total shares outstanding. Here are five stocks which hedge funds have reported buying recently:
Billionaire Stephen Mandel’s Lone Pine Capital has reported a position of over 10 million shares in Michael Kors Holdings Ltd (NYSE:KORS), or just over 5% of the company; this is up from about 8.1 million shares as of the beginning of April (see more of Mandel’s stock picks). The apparel and accessories company is a growth monster: revenue was up over 50% in its fiscal Q1 (which ended in June) versus a year earlier, with net income rising over 80%. Markets have already priced in high growth, with a trailing P/E of 33, but forecasts from Wall Street analysts place the five-year PEG ratio right about at 1.
SAC Capital Advisors recently disclosed ownership of 3.9 million shares of Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), an owner of television stations which recently completed its acquisition of Fisher Communications. SAC is managed by billionaire Steve Cohen and his team (find Cohen’s favorite stocks). Higher costs and interest expenses have offset revenue growth at Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) in recent quarters, though in part due to this acquisition the sell-side seems to expect improvement next year. Specifically, analysts are forecasting $2.69 in EPS- resulting in a forward P/E of 9- though we would be a bit concerned about integration risk.
Claus Moller’s P2 Capital has been increasing its already large ownership stake in Blount International Inc (NYSE:BLT) to nearly 7 million shares (research more stocks P2 owns). Blount International Inc (NYSE:BLT) is a $590 million market cap provider of forestry, lawn, and farm tools (on average over 270,000 shares are traded per day, so at the current stock price of about $12 there is plenty of daily dollar volume). Earnings were down 29% last quarter compared to the second quarter of 2012. Given the respective trailing and forward P/Es of 15 and 11, the financial community seems to be expecting something of a rebound here.
About 5% of Quanex Building Products Corporation (NYSE:NX) is owned by Jeffrey Gates’s Gates Capital Management according to a recent 13G. Quanex Building Products Corporation (NYSE:NX) provides aluminum sheets as well as components used to install windows and doors; the company is therefore one possible way to play the housing market and construction activity in residential real estate. The stock trades at 44 times forward earnings estimates as investors are bullish on the industry; revenue was up 20% in its most recent quarter compared to the same period in the previous fiscal year, though Quanex Building Products Corporation (NYSE:NX) reported a net loss.
Disclosure: I own no shares of any stocks mentioned in this article.
