What Hedge Funds Are Buying And What To Look For

Includes: AIG, PCLN, YHOO
by: Cambridge Fund Research

As we approach 13F releases, it's illustrative to review what some of the more popular stocks were with the hedge fund community last quarter. Below is a snapshot of our hedge fund holdings report (full report can be seen here) showing the stocks held by the 12 hedge funds profiled in our quarterly newsletter (sorted descending by how many of the 12 hedge funds had a position in that name):

American International Group (NYSE:AIG) is an international insurance company that was famously bailed out by the U.S. government in 2008. More recently, however, things have started to turn around at the insurance giant and the hedge funds have taken notice. David Tepper of Appaloosa was one of the first (and most vocal) owners of AIG after the crisis but has since sold and re-initiated a large position:

(click here for full report):

Bruce Berkowitz of Fairholme Capital, however, has undoubtedly made the biggest bet on AIG within the hedge fund community by far. Most of the hedge funds that hold AIG don't even show up in the top 20:

AIG has been a volatile ride for those who have stuck it out but the fundamentals have started to improve and the hedge funds have taken notice:

The stock has been in a steady uptrend since the beginning of 2012, and currently sports a book value of $57 and a P/E of 20 and a forward P/E of about 10.

Of the 12 largest and best-known hedge funds that we profile each quarter, AIG was held by seven of them with an average position size of 3.6%:

(click here for full report)

Yahoo Inc. (NASDAQ:YHOO)

Yahoo has been plagued by problems in recent years and was more recently under attack by Dan Loeb of Third Point who waged a very public activism campaign against management and, as of last quarter, YHOO was still his biggest position:

Recently, YHOO is looking a little better. The company is pushing forward in the mobile market with a big app campaign. The company has a P/E of about 7 and trades for less than 2x book value.

Of the 12 hedge funds profiled in our quarterly newsletter, half of them had a position in YHOO last quarter an average position size (as a % of longs) of 5.6%:

Priceline (NASDAQ:PCLN)

Priceline has been putting up some good numbers recently with strong growth in earnings per share, income and top-line revenue. As a result the company's shares are up over 13% already in 2013.

Steve Mandel's Lone Pine Capital had one of the biggest positions in Priceline and has continued to increase it until it's currently his top position representing 7% of his total long book:

Hedge funds tend to traffic in the same names quarter after quarter and this is a glimpse into some of the names to look out for among the top hedge funds during this month's 13F filings.

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 (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.