By Matt Doiron
The most comprehensive look at hedge fund stock holdings comes in the form of quarterly 13F filings, and the information in these filings can be a useful source of investment strategies. We have found, for example, that 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). Some investors, however, prefer more up to date information on what hedge funds are doing. After a fund or other major investor crosses the 5% ownership threshold, it must file a 13D or 13G with the SEC within a fairly short amount of time; we also track these filings and think that investors can use them similarly to a stock screen, potentially identifying companies which are worthy of further research. Here are five stocks that hedge funds have reported buying recently:
Steadfast Capital Management, managed by Robert Pitts, was buying back into Yelp Inc (YELP) after taking a 5% position in October 2012 and then selling most of those shares by the end of the year. The company lost 35 cents per share in 2012, and Wall Street analysts expect the company to be narrowly unprofitable this year; after that point, however, the history of high revenue growth is expected to pull Yelp into the black. Specifically, sales were up 65% in the fourth quarter of 2012 versus a year earlier. We, however, are skeptical that revenue growth will actually create this much value as we are with many social media companies.
International Paper Company (IP), a large manufacturer of paper and packaging products, had Doug Silverman's Senator Investment Group report ownership of over 23 million shares of stock (up from less than 10 million shares and call options at the beginning of January). This represents a very large position for the hedge fund (find Silverman's favorite stocks). The paper industry is struggling, and business troubled have in turned led to write-downs and restructuring costs leaving International Paper's trailing earnings quite low. Sell-side expectations are optimistic with consensus implying a forward P/E of 10.
According to a 13G Corsair Capital Management owns 2.8 million shares of Wausau Paper Corp. (WPP), a $530 million market cap paper products company (on average over 200,000 shares are traded per day, so at the current price of over $10 per share there is over $2 million in daily dollar volume). As with International Paper, Wausau has been struggling and here analysts are less cool on the company's prospects; the stock trades at 21 times forward earnings estimates. Sales decreased slightly in Wausau's most recent quarter compared to the same period in the previous year.
Billionaire Steve Cohen's SAC Capital Advisors reported a position of 1.8 million shares in Stage Stores Inc (SSI), a collection of department store and apparel store brands with a market cap of about $830 million (with plenty of dollar volume for most investors). See Cohen's stock picks. The stock is up 59% in the last year as the business has grown nicely: in the quarter ending in early February, the fourth of Stage Stores' fiscal year, revenue and earnings both increased about 10% from their levels a year ago. The market is expecting strong growth rates to continue, as the trailing earnings multiple is 22.
Marcato Capital Management has disclosed a stake of 2.6 million shares in data center facilities company CyrusOne Inc (CONE)- making for almost 12% of the total shares outstanding. CyrusOne went public on January 18th and is currently up 8% from its levels shortly after the IPO. It is another company which is expected to lose money in 2013 as it continues growing, with recent history showing improvements at least on the top line. Revenue grew 11% in the most recent quarterly report compared to the fourth quarter of 2011.