By Michael Vodicka
Hedge fund billionaires are known for two things: Making highly profitable investments that frequently outperform market averages, and pushing stocks higher behind huge trading size and volume.
So when the top names in the industry make bold moves into new investment ideas, legions of big and small investors across the world follow very closely to try to catch a little bit of that hedge fund magic.
And that's exactly what happened in early November, when the latest batch of 13F filings hit the Street. The 13F is a quarterly report of equity holdings that financial institutions with at least $100 million in assets under management are required to file with the Securities and Exchange Commission (SEC). The report is an incredibly valuable tool, offering great insight into portfolio adjustments the most powerful hedge funds in the world make.
In the latest iteration of these closely-watched reports, more than a few central themes have emerged and a handful of companies are gaining attention. Here are five stocks that saw huge capital inflows from the biggest hedge funds in the world during the third quarter, making them prime candidates for big gains in coming months.
1. Yahoo! Inc.
Yahoo! (NASDAQ:YHOO) is in full turn-around mode after poaching top Google Inc. (NASDAQ:GOOG) executive Marissa Mayer for the CEO position in July. There's no doubt Mayer will be sharing and implementing Google's highly effective search and growth strategies at Yahoo!, which has generated huge interest from the hedge fund community. That includes David Einhorn of Greenlight Capital, the billionaire hedge fund manager who has made headlines after scoring huge gains shorting Chipotle Mexican Grill (NYSE:CMG) and Green Mountain Coffee Roasters (NASDAQ:GMCR). Einhorn initiated a stake in Yahoo! during the third quarter, with Greenlight's 13F filing revealing the fund had purchased 5 million shares ranging between $14.65 and $16.23 a share.
Facebook (NASDAQ:FB) was also a common buy among some of the biggest names in the hedge fund world, led by Charles Coleman's $8 billion Tiger Global Management. Coleman has earned the reputation as a master Facebook trader, after creating a venture capital vehicle to accumulate shares of the social networking giant at discount prices long before its IPO in April of 2012. He then proceeded to unload one-third of his holdings on the day of Facebook's IPO for a hefty $715 million profit. Now, Coleman's latest move, revealed through Tiger Global's third-quarter 13F filing, was to pump up his Facebook position from 2 million to 11 million shares. There's no doubt that had a lot to do with Facebook's stock dropping as much as 50% since its IPO, enticing fellow hedge fund master Paul Tudor Jones II to buy 100,000 shares of his own.
3. General Motors
Warren Buffett is largely considered the greatest investor in modern history, accumulating a fortune valued more than $50 billion by investing in U.S. blue chips like Coca Cola (NYSE:KO) and General Electric (NYSE:GE). But according to his company's latest 13F filings, Buffett recently boosted his stake in another iconic U.S. brand, carmaker General Motors (NYSE:GM), increasing his shares held by 50% to 15 million. Fellow hedge fund billionaire David Tepper, who ranks 59 on Forbes' 2012 list of the richest people in the United States, wasn't far behind, increasing his stake in General Motors by 26% to 6 million shares.
4. American International Group
American International Group (NYSE:AIG) was one of the most controversial companies in the financial implosion of 2008, requiring $182 billion in government bailouts to be able to remain operational. But now that a few years have passed, the company is once again turning a profit, and the hedge fund crowd is recognizing opportunity. This had George Soros, the billionaire manager and co-founder of the legendary Quantum fund, buying 15 million shares during the third quarter, making the resurgent insurance and financial company his largest holding. AIG was one of the most active stocks in the hedge fund community during the third quarter, with total filers climbing 80% to 110 from the previous quarter, according to Insider Monkey.
5. Priceline.com Inc.
Priceline (NASDAQ:PCLN) has been red hot in the past two years, with shares up a market-beating 55%. But it's clear the hedge fund community still sees plenty of upside in this online travel agent leader, with four billionaire hedge fund managers taking big positions during the third quarter. That includes Lone Pine Capital, managed by billionaire Stephen Mandel, increasing its stake by 26% from July to September to a total of 1.4 million shares. That lifted the fund's total investment in Priceline to $850 million, its single largest position.
Risks to Consider: The most popular stocks with hedge funds can be volatile if managers cool on any individual stocks. This is what's driving Apple's (NASDAQ:AAPL) decline, the most widely held stock with hedge fund managers for most of the year, currently suffering a sharp drop of 13% in the past three months, as hedge fund managers rotate into fresh ideas.
Billionaire hedge fund managers have a track record of scoring big gains and moving the market with their latest investments and trades. Mimicking these titans of Wall Street is a great way to follow the smartest money on the Street and give your portfolio the look of a hedge fund billionaire.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: StreetAuthority LLC owns shares of YHOO, in one or more of its “real money” portfolios.