5 Stocks Being Accumulated By Hedge Funds - Seeking Alpha

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. (More...)

One of the best ways for investors to get a feel for solid investments is to look at what hedge funds and institutional firms are buying. These funds typically spend a great deal of time analyzing industries, corporate financials, and executive competency. If an investor feels strongly about a stock, seeing that a hedge fund added a position can serve as an added confirmation. Investors can track these purchases through the 13F quarterly report.

The 13F is a quarterly report containing details regarding large stock holdings held by institutions with at least $100 million in assets under management. These large institutions are required to file these reports with the Securities and Exchange Commission. The 13F is incredibly useful for investors and traders, as it allows the small retail person to follow what the large professional is investing in. It is one way to help balance out the uneven flow of information.

The list below includes five stocks in which funds have increased their holdings by at least 5 million shares (as of the November filing) and have an average equity trading volume of at least 1.5 million shares each day. The liquidity is important as it allows investors to enter and exit their positions easily.

Abercrombie & Fitch (ANF)

In the latest filing, Citadel Advisors purchased over 5,000,000 shares. Its current holdings of ANF stands at just over 5.2 million shares. Citadel owns 6.3% of the company.

The company has had a fantastic performance over the past three months, which coincided with the most recent filing indicating large hedge fund purchases. The company has rallied mostly on the back of a strong earnings report in mid November. The stock jumped by more than 30% after the earnings announcement.

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With a strong chart, a fantastic earnings report, and added institutional buying, I would look to get long on any weakness over the next few weeks.

Star Scientific (STSI)

In the latest filing, net institutional purchases totaled approximately 13 million shares. This represents roughly 9.3% of the company's current float of 140 million shares.

The stock has fallen during the previous three months of trading but has seen a significant rise since November. This coincides with the 13F filing and once again indicates that funds know the right time to make an investment.

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Although the stock has seen a swell of institutional buying and a sharp rise in share price, the stock appears to have reached a tipping point with the stock selling off over the past week. The company's future depends on its ability to win lawsuits against the major tobacco companies for product infringement. It is unclear how long the company can last. Future secondary offerings are a possibility. Because of the uncertainty regarding the company's business model, I would advise to stay on the sidelines for now.

General Electric (GE)

In the latest filing, Bright Light Capital purchased just over six million shares to bring its total holdings of General Electric to 9.2 million shares.

The stock has fallen off over the past three months, although it has risen slightly since November.

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As the chart indicates, the stock has fallen since its earnings report in Mid October. What is also interesting to note are the rising volatility levels indicating that traders feel the shares may be in for some larger than usual price swings over the next 30 to 60 days.

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With escalating volatility and a stock price that has underperformed over the past few months, I would advise investors to stand on the sidelines until a better opportunity for entry presents itself.

Yahoo (YHOO)

During the most recent quarter, Greenlight Capital initiated a new position in the company of 5.1 million shares. Also, Third Point Capital added to its position as well. Interesting to note that Third Point was responsible for the ousting of the previous CEO and replacing the CEO with Marissa Mayer, formerly of Google Inc. (GOOG).

Over the past three months, Yahoo's stock performance has been one of the leaders across the market. This has been mostly fueled by the company's stellar earnings report on October 22, 2012. This caused an almost 6% increase in the underlying price and the stock hasn't looked back since. Currently, the company is trading at just 16 cents under its 52-week high.

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With a new but well trained CEO leading the charge, a fantastic set of technicals, and David Einhorn backing the company, investors should consider getting long.

Facebook (FB)

During the most recent quarter, Tiger Global increased its Facebook holdings by 9,000,000 shares. The fund now owns 11 million shares of the social networking company. Additionally, fellow hedge fund manager Paul Tudor Jones II, also purchased 100,000 shares of FB.

Over the past three months, Facebook's share price has been on a tear. It has traded back up to the mid 20s, which wasn't seen since the stock continued to descend in price after its initial public offering.

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There are several reasons for the recent increase in share price. The company released a strong earnings report in late October that caused investors to get back in. Additionally, the company has shed light on its plan to generate future revenue. A few of these opportunities include charging users for access to music and charging third parties for integration. Additionally, the company may eventually get into other segments of the market like online dating. With 1 billion unique visitors during the last quarter, a dating site could stand to be a profitable venture.

Investors who don't already own shares of Facebook, may want to consider adding a starter position and then monitor the share price over the next few months.

Conclusion

These institutional holdings are very interesting to analyze as they indicate what types of companies the largest money managers in the world are looking at. These 13F reports should be used as an additional tool for everyone's investing methodology. If you're going to follow these investments and also build a position, it's important to look at future 13F filings to determine if these same money managers reduced or sold out of their holdings.

Source: http://seekingalpha.com/article/1085651-5-stocks-being-accumulated-by-hedge-funds?source=feed

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