There are a number of methods for tracking investment activity from hedge funds and other major investors. These market players file 13Fs on a quarterly basis, disclosing many of their long equity positions with a several week lag, and we’ve found that even with this delay 13Fs can be useful sources of information in developing investment strategies. In fact, the most popular small cap stocks among hedge funds generate 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 since inception 11 months ago.
Hedge funds also file 13Ds or 13Gs shortly after taking a position of 5% or more of a company. While this generally limits reporting to investments in small-cap stocks, they occur fairly soon after a fund has been buying and therefore serve as relatively up-to-date picks. Read on for our quick take on five stocks hedge funds have bought recently.
Glenview Capital, managed by Larry Robbins, has joined the fray at battleground stock J.C. Penney Company, Inc. (NYSE:JCP), disclosing ownership of over 20 million shares of 9.1% of the department store. Find Glenview’s favorite stocks. A number of funds have piled into J.C. Penney Company, Inc. (NYSE:JCP) as billionaire Bill Ackman’s Pershing Square has exited the stock, but the business still remains troubled. Revenue declined by 12% in its most recent quarter compared to the same period in the previous fiscal year, and Wall Street analysts continue to project net losses for J.C. Penney Company, Inc. (NYSE:JCP) both this year and next year. The most recent data shows 41% of the float held short.
Billionaire Andreas Halvorsen’s Viking Global (see Halvorsen’s latest stock picks) has reported a stake of 5.4% in aircraft structures and components manufacturer Triumph Group Inc (NYSE:TGI). Recent acquisitions have helped Triumph grow its sales overall compared to a year ago, but other segments of the company’s business have been struggling and even with the increases in revenue Triumph’s pretax income has been about flat. The trailing P/E here is only 13, but even at that fairly cheap pricing we would want to see at least modest improvements on the bottom line to consider it a value stock.
SAC Capital Advisors has filed to report a position of 1.1 million shares in Diamond Foods, Inc. (NASDAQ:DMND), a snack food company focusing on nuts, granola, and other ready-to-eat foods. Business has been poor recently, and in fact Diamond experienced an 11% decline in sales in its most recent quarterly report from its levels a year earlier. While analysts are looking for a turnaround at the company, the forward earnings multiple is still fairly high (at over 40) and Diamond Foods is a popular short target with short sellers responsible for 28% of the float. SAC Capital is managed by billionaire Steve Cohen (check out more stocks Cohen likes).
