After a hedge fund or other major investor acquires at least 5% of the outstanding shares of a public company or makes significant changes to that position, they file a 13D or 13G with the SEC. While these filings aren’t nearly as comprehensive as the 13F filings which we use to help develop investment strategies (we have found, for example, that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year), it can be useful to have more up-to-date information about specific stocks that specific funds are buying. Here are five stocks which hedge funds have bought recently:
A 13G has disclosed that Glenhill Advisors, run by Glenn Krevlin and his team, own 2.7 million shares (or 5%) of The Pep Boys – Manny, Moe & Jack (NYSE:PBY). Find Glenhill’s favorite stocks. The company has been struggling recently, with very little pretax income in its most recent quarter. Analysts expect business to improve but even their forecasts for decent growth over the next year or so result in a forward P/E of 18. At that pricing we’d want to see sustainable moderate to high earnings growth, and given The Pep Boys – Manny, Moe & Jack (NYSE:PBY)’s recent performance we wouldn’t consider it a good buy right now.
Starboard Value, an activist fund managed by Jeffrey Smith, has bought up the equivalent of 6.3 million shares in data center networking device company Emulex Corporation (NYSE:ELX) (see Starboard’s stock picks). Emulex Corporation (NYSE:ELX) has reportedly hired Goldman Sachs to help it explore a sale process. Earnings per share were negative in the first nine months of the company’s last fiscal year (which ended in June) though Wall Street analysts are fairly optimistic about its prospects and as a result the current-year earnings multiple is 13. With revenue down, we don’t like the stock in terms of its fundamentals and think that Starboard is speculating on a deal happening.
Brian Taylor’s Pine River Capital Management reported a 9.2% stake in American Capital Mortgage Investment Crp (NASDAQ:MTGE), owning almost five times as many shares as it had owned at the beginning of April. Check out more stocks Pine River owns. The real estate investment trust pays a high dividend yield- as do many other such businesses, particularly those which invest in mortgage-backed securities- but we’d note that with the stock down over 30% year to date even with its high yield recent buyers have lost money. Interestingly, the P/B ratio is considerably less than 1. Mortgage REITs, of course, are risky due to their business.
Freight brokerage, transportation, and logistics company XPO Logistics Inc (NYSE:XPO) has also seen attention from a fund, with Brian Bares’s Bares Capital Management increasing its ownership to over 10% of the company. Acquisitions in the freight brokerage space have made that segment the source of most of XPO’s revenue, though the company’s losses have also been increasing. Analyst expectations are for essentially zero profit in 2014, and the stock is a popular short target with 22% of the float held short. With some concern over potential integration risks as well as the poor financial performance, we don’t think XPO is a good buy.
Disclosure: I own no shares of any stocks mentioned in this article.
