Seeking Alpha
Newsletter provider, fund holdings, insider ownership
Profile| Send Message| ()  

Long/short hedge funds are generally value investors. When they buy, they want to pay less than what a stock is worth. This doesn’t mean that hedge funds don’t invest in growth stocks with high PE ratios. Last summer, David Einhorn bought more than 800 thousand shares of Apple (AAPL), arguing that the stock’s PE ratio is extremely low compared to its growth prospects. Einhorn paid less than $250 per Apple share. There are several growth stocks that hedge funds think are undervalued.

We compiled the list of top 30 growth stocks where there are at least 70 hedge funds invested in the stock. The data source for Wall Street Analysts’ growth projections is Thomson Financial. Here are the top 30 stocks with the highest expected annual growth rates over the next 5 years that hedge funds are crazy about:

Company

Ticker

Expected Growth Rate

No of Hedge Funds

Directv

DTV

18.4

80

Apple Inc

AAPL

17.9

195

Amazon.Com Inc

AMZN

17.9

76

Mastercard Inc

MA

17.2

83

Ford Motor Co

F

16.9

102

Schlumberger Ltd

SLB

16.7

82

Halliburton Co

HAL

16.2

85

Qualcomm Inc

QCOM

16.0

109

Google Inc

GOOG

15.4

156

Williams Cos Inc

WMB

14.2

75

Emc Corp/Ma

EMC

13.0

78

Devon Energy Corp

DVN

12.9

80

Oracle Corp

ORCL

12.8

102

Union Pacific Corp

UNP

12.6

74

Teva Pharmaceuticals

TEVA

12.5

79

Potash Corp

POT

12.2

101

Liberty Media Starz G

LSTZA

12.0

81

Intel Corp

INTC

10.8

92

National Oilwell Varco

NOV

10.7

77

General Electric Co

GE

10.2

88

Unitedhealth Group

UNH

10.0

76

Cvs Caremark Corp

CVS

9.9

91

IBM

IBM

9.6

75

CF Industries

CF

9.6

79

Cisco Systems Inc

CSCO

9.4

124

Microsoft Corp

MSFT

9.3

161

Exxon Mobil Corp

XOM

9.3

102

Wal-Mat Stores Inc

WMT

9.3

88

Hewlett-Packard Co

HPQ

8.9

114

Anadarko Petroleum

APC

8.7

77

These top 30 stocks returned 6.6% so far in 2011, beating the SPY by 1.9 percentage points. Directv tops the list with 18.4% expected annual growth rate. DTV didn’t disappoint its investors, gaining 17.9% since the end of 2010. Chase Coleman’s Tiger Global, Lee Ainslie’s Maverick Capital, George Soros, Roberto Mignone’s Bridger Management, and Jim Simon’s Renaissance are among the prominent hedge funds with DTV holdings.

Nearly 200 hundred hedge funds own 4% of the outstanding shares. Hedge fund stars like David Einhorn, John Griffin, Stephen Mandel, Chase Coleman and John Burbank all own AAPL in their portfolio. Amazon is another stock that’s extremely popular among Tiger cubs. Chase Coleman’s Tiger Global, John Griffin’s Blue Ridge Capital, Andreas Halvorsen’s Viking Global, Bill Miller’s Legg Mason, and Roberto Mignone’s Bridger Management have Amazon in their portfolios. We believe investors can perform better than the market over the long term by imitating hedge funds’ favorite growth stock.

Source: Top 30 Growth Stocks Hedge Funds Are Crazy About