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

Corporate insiders have material non-public information about their companies. They sometimes even trade on such information. Hedge funds sometimes also can obtain material non-public information and trade on it. This is illegal and those insiders and hedge fund managers may be caught and be sent to prison one day. However, ordinary investors can benefit from material non-public information by imitating the investments of insiders, which is totally legal.

In this article, we are going to look at the stocks insiders and Third Point’s Dan Loeb are bullish about. Loeb is the founder of New York based hedge fund Third Point. He is a very outspoken investor and a pioneer in activist investing. He expresses disapproval of the performance and conduct of other financial executives by writing public letters. Recently he has been targeting Yahoo (YHOO) with a $632 million position at the end of September. His other large current bets are Williams Cos (WMB) and El Paso (EP). Under his management, the flagship fund of Third Point returned 41.7% in 2010. Loeb also made $150 million in 2005, $200 million in 2006, and $270 million in 2007. He is one of our favorite fund managers.

Below is a list of stocks both insiders and Loeb love. All companies were in the 13F portfolio of Third Point as of September 30 and were bought by at least one insider during the past month.

Company Name

Ticker

Value

Activity

Insiders

HOLLYFRONTIER

HFC

87837

New

2

MEAD JOHNSON

MJN

75713

-31%

1

XERIUM TECH

XRM

17799

0%

1

CREXUS INVESTMENT

CXS

16206

-9%

1

SUNCOKE ENERGY

SXC

9900

New

1

LIGAND PHARMA

LGND

9645

0%

1

During the third quarter, Third Point initiated a brand new $88 million position in HollyFrontier Corp (HFC). The stock was also bought by two insiders in the past month. On November 21, Franklin Myers purchased 444 shares at $23.6. On the same day, another director Michael Jennings also purchased 2000 shares at $24.106. Now HFC is trading at $22.25 per share. It has a market cap of $4.73B and a P/E ratio of 4.35. Over the third quarter, Steven Cohen’s SAC Capital Advisors also bought $96 million worth of new HFC shares.

Another large-cap stock both Loeb and insiders are bullish about is Mead Johnson Nutrition Co (MJN). At the end of September, Third Point reported to own $76 million worth of MJN. There was one insider who bought MJN during the past month. Robert Singer bought 1000 shares at $69.704 on November 21. Singer also bought 1000 shares at $70.65 on November 18 and another 1000 shares at $70.49 on November 17. Now MJN is trading at $75.07 per share. It has a market cap of $15.14B and a P/E ratio of 29.29. Billionaire Jim Simons is also bullish about MJN. As of September 30, his Renaissance Technologies had $131 million invested in the stock.

Loeb and insiders are also bullish about Xerium Technologies Inc (XRM), Crexus Investment Corp (CXS), Suncoke Energy Inc (SXC), and Ligand Pharmaceuticals Inc (LGND). We like the activist investing style of Loeb a lot. The historical performance of his fund is also outstanding. Additionally, our previous studies have shown that investors can beat the market in the long term simply by imitating the insiders. Therefore, we urge investors to focus on the stock picks of Loeb and insiders, and do some in-depth research about these stocks.



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Insiders And Hedge Fund Star Dan Loeb Are Bullish About These Stocks