One of the best ways that investors can try to decide which stocks will make for a good investment is to look at what the pros are doing. This can be done by examining a few official filings such as 13F, 13D, and 13G reports. 13F filings are done quarterly and show which positions hedge funds have taken. 13D and 13G reports are done more often but only when a fund has taken a position of at least 5%. Having said that let's take a look at 4 stocks which appear to be in the midst of hedge fund accumulation. The 3 stocks were chosen based on the following criteria:
- Return Of At Least 15% Since March 1
- Hedge Funds Have Added At Least 1 Million Shares To There Holdings Since Jan 1, 2013
- Average Trading Volume Of At Least 1.5 Million Shares
- Market Capitalization Of At Least $800 Million
Celldex Therapeutics (CLDX)
Celldex Therapeutics is a biopharmaceutical company focused on the development, manufacture, and commercialization of human healthcare treatments. The company's flagship product is CDX-011, currently being tested to treat metastatic breast cancer.
One of the top hedge funds in the world, SAC Capital, recently raised their stake in Celldex Therapeutics. In a recent 13G filing, filed on April 12, 2013, it was revealed that SAC Capital increased their stake from 2.7 million shares to 4.32 million shares. SAC Capital now owns 5.36% of Celldex Therapeutics.
Celldex has had a heck of a stock run lately as the chart below shows.
The fundamentals also indicate Celldex may be on the right path. During the company's last annual income statement filing, the company reported revenue of almost $11.2 million. The company did report an operating loss of $58.1 million, however most of that (85%) was due to research development costs which are to be expected with a biotechnology company that is this far along in its trials. A big positive for investors is that the company has total current assets of $85.1 million, including $24.9 million in cash and $59.1 million in short term marketable investments. This essentially means that the company won't need to issue additional shares and thus investors won't need to worry about dilution for some time.
Microsoft Corporation (MSFT)
Just recently, it was revealed that ValueAct Capital Management had taken a large stake in Microsoft. The hedge funds owns approximately $2 billion worth of Microsoft shares. The stock has rallied since the announcement which comes on the back of an impressive earnings release by Microsoft.
ValueAct is known for its activist role in companies that it owns, especially seeking board seats or asking for other corporate changes. It remains to be seen what changes ValueAct will want to make, if any. It is worth noting that two years ago, David Einhorn of Greenlight Capital took a stake in the company in an effort to oust CEO Steve Ballmer. The effort proved unsuccessful.
Microsoft stock has been on absolute tear of late as the chart below shows.
This recent run up has sparked new enthusiasm amongst Microsoft investors especially on the back of Microsoft's recent earnings report.
On April 18, 2013, Microsoft released their third quarter earnings report for the 2013 fiscal year. The results were outstanding, especially when compared to the same quarter a year ago. Revenue for the quarter came in at $20.5 billion, an increase of 18% from the same period a year ago. Operating income came in at $7.6 billion, an increase of 19% from the prior year's third quarter. It certainly appears that ValueAct had a strong feeling about Microsoft and are reaping the rewards now.
Nuance Communications (NUAN)
Nuance Communications is a provider of voice and language solutions for business solutions for businesses and consumers globally. The company offers accuracy, natural language understanding capability, domain knowledge and implementation capabilities.
Nuance has been on quite a run recently due to Carl Icahn's recent disclosure that he owns over 9% of the company. The speculation is that he will push for the company to sell the whole company or a part of it. And in fact, the company recently announced that it had hired Goldman Sachs as its advisor.
The stock has had its ups and downs over the past year.
The company recently fell off hard after its last earnings report. This likely prompted Carl Icahn to come in and invest while the company was cheap. Last quarter's numbers were nothing short of a disaster. The company's revenue came in short of expectations at $462.3 million. Additionally, due to larger than normal expenses, the company's operating income came in much lower than it had been over the past couple of years. The operating income was $6.2 million, compared to the prior quarter which had an OI of $46.6 million. And the company ended up with a net loss for the quarter of $22.1 million.
Investors should exercise extreme caution with Nuance because the stock is being propped up by rumors of a potential sale. If that sale doesn't materialize, the stock is likely to slide back to where it was trading after its latest earnings report.