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So What are Hedge Funds Buying These Days ?

“Several weeks after the end of each fiscal quarter, the SEC requires hedge funds and many other major investors to file 13Fs which disclose many of their long-equity positions in U.S. stocks as of the end of that quarter. These filings come shortly after an investor buys 5% of a company’s outstanding shares, and can therefore provide initial ideas from these investment managers for further research. Here are five stocks which hedge funds have bought recently:

Billionaire George Soros reported a position of over 17 million shares in J.C. Penney JCP +2.99% , the troubled retailer backed by Bill Ackman’s Pershing Square. Revenue fell 25% in J.C. Penney’s most recent fiscal year compared to the previous one, with resulting operating losses of about $1 billion; the CEO recently left the company following what has been a failed turnaround.

Wall Street analysts are forecasting continued net losses this year and next year, though the consensus is that the company will improve over that time frame. Soros’s involvement is interesting, but we still wouldn’t consider J.C. Penney a buy right now.

Blue Mountain Capital Management, which is managed by Andrew Feldstein and Stephen Siderow, had not owned any shares on Lexmark LXK +0.03% at the beginning of 2013, but has since purchased 3.6 million shares, giving it 5.6% of the company.

Lexmark rose after its first-quarter results beat expectations, even though revenue was down 11% vs. a year earlier and earnings-per-share (EPS) fell by 36%. The sell-side is bullish, with the stock trading at eight times forward-earnings estimates, though we would be skeptical of their optimism. We would note that Lexmark pays a dividend yield of 4.7% at current prices and dividend levels.

Billionaire Ken Griffin’s Citadel Investment Group has bought additional shares of Halcon Resources HK -11.20%, giving the fund a total of over 18 million shares in its portfolio. Halcon is a $2.5 billion market cap oil-and-gas-exploration-and-production company; despite the fact that its production mix is about 70% oil (which currently has a more favorable market environment than natural gas), it experienced an operating loss in 2012 due to higher costs. The forward-earnings multiple is only nine, but we think that we would prefer to look at other shale E&P companies such as Continental CLR -0.74%  and KodiakKOG -1.89% …..”

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