Corporate insiders and hedge funds generally have an edge over ordinary investors. Our research has shown that investors can beat the market by focusing on the top stock picks of insiders and successful fund managers. In this article, we are going to focus on the stocks that insiders and hedge fund manager Ken Griffin are bullish about. Griffin is the founder and CEO of Citadel Investment Group. He started to trade stock options in his dorm at Harvard when he was a freshman there. Today, Citadel is one of the largest hedge funds in the world and has a reputation for outstanding execution. The fund was up 20.4% in 2011, while many other famous hedge funds suffered losses due to the European debt crisis. Below is a list of stocks both insiders and Ken Griffin love. All stocks were purchased by at least one insider over the past month and Griffin invested more than $10 million in these stocks.
The top three largest positions with an insider purchase in Griffin’s portfolio are all financial stocks: E Trade Financial Corp (ETFC), PNC Financial Services Group Inc (PNC), and Wells Fargo & Co (WFC). As of September 30, 2011, Citadel invested $250 million, $199 million, and $103 million respectively in these three stocks. ETFC lost 0.99% since the end of September, but the other two stocks outperformed the market. PNC returned 28.81% and WFC gained 23.42% since the end of the third quarter, versus 14.91% for (SPY) in the same period.
Wells Fargo was purchased by one insider during the past month. John Baker purchased 662 shares of WFC at $27.2599, 66 shares at $27.26, and another 248 shares at $27.2999 on December 28th. Now WFC is trading at $29.61 per share, about $2 up from the prices at which Baker purchased. WFC has a market cap of $156B and a relatively low P/E ratio of 10.97. At the end of the third quarter, there are 69 hedge funds with WFC positions. For example, Warren Buffett’s Berkshire Hathaway had $8.7 billion invested in WFC. John Paulson cut his stake in Wells Fargo by 29% during the third quarter, but his fund still had $575 million invested in the stock at the end of September.
PNC is also a popular stock among hedge funds. There are 26 hedge funds reported to own PNC at the end of September. Ken Fisher’s Fisher Asset Management had nearly $300 million invested in PNC. Ric Dillon and Bill Miller also like the stock. Both of their funds had over $100 million invested in PNC at the end of the third quarter. In addition to hedge funds, corporate insiders also love PNC. During the past month, PNC was bought by one insider. Helge Wehmeier, director at PNC, bought 320 shares at $59.1372 and another 20 shares at $59.15 on January 3rd. Now PNC is trading at $61.54. Similar to WFC, PNC also has a low P/E ratio of 9.75. Therefore, though it has already gained more than 20% since the end of the third quarter and was up $2 from the prices at which Wehmeier bought, PNC is still very attractive as it is very likely to be trading at a discount.
Blackrock (BLK) is another stock that is favored by hedge funds and insiders. Jim Simons’ Renaissance Technologies initiated a brand new position in the stock during the third quarter. Ken Griffin’s Citadel was also bullish about the stock, boosting its stake by 35%. Blackrock had an insider purchase over the past month. Another stock with a single insider purchase over the past month is Best Buy (BBY). Last year’s successful hedge fund managers David Einhorn, Steven Cohen, and Ken Griffin had positions in the stock at the end of September.
Other large-cap stocks that Griffin and insiders are bullish about include Ecolab Inc (ECL), Alcoa Inc (AA), EQT Corp (EQT), Lexmark (LXK), Perrigo (PRGO) and McGraw Hill Cos Inc (MHP). According to our past studies, insider purchases on average beat the market in the following 12-month period. We urge investors to research these stocks that both Ken Griffin and insiders love for their portfolios.
