(Written by Alexander Crawford. Institutional data sourced from Fidelity.)
A new batch of quarterly regulatory filings indicate that some of the biggest names in investing – including Warren Buffett and David Tepper – have been shifting to lower risk, lower return investments. This change in outlook has other investors wondering whether they should follow suit and re-assess their risk.
One of the biggest trades released this week was Warren Buffett’s $10.7 billion purchase of IBM shares. According to Dave Rovelli, managing director of US equity trading at Canaccord Adams, Buffett’s long-awaited move into anything tech indicates he is “running out of places to put his money.” (via CNBC)
Senior writer at CNBC Jeff Cox points out that IBM’s yield “isn’t all that impressive at about 1.6%,” but that the stock has still been up 30% over the past year “easily outperforming its peers.”
David Tepper, founder of hedge fund Appaloosa Management LP, made a decisive move out of financials in the third quarter and pared back equities overall – most likely a response to financial exposure to European debt and increased banking regulation.
“We still think it makes sense to be cautiously bullish here, said Ryan Detrick, senior analyst at Schaeffer’s Investment Research. He says he didn’t see anything in the 13f reports that indicates an outright bearish bias in the markets. (via CNBC)
With big investors making more cautious bets, we ran a screen for other “tried and true” stocks currently popular among big money investors like hedge funds.
We began by screening the S&P 500 for companies with low amounts of debt, with debt-to-equity ratios below 0.3. We then screened for stocks with significant amounts of net institutional purchases over the current quarter. (Institutional investors primarily include hedge fund managers and mutual fund managers.)
Do you agree with the big money on these names? Use this list as a starting point for your own analysis.
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List sorted by net institutional purchases as a percent of share float.
1. The Mosaic Company (MOS): Engages in the production and marketing of concentrated phosphate- and potash-based crop nutrients for the agriculture industry worldwide. Market cap of $25.38B. Debt/Equity at 0.07. Net institutional shares purchased over the current quarter at 75.3M, which is 16.88% of the company's 446.13M share float. The stock has lost 14.2% over the last year.
2. GameStop Corp. (GME): Operates as a retailer of video game products and personal computer (PC) entertainment software. Market cap of $3.43B. Debt/Equity at 0.09. Net institutional shares purchased over the current quarter at 9.0M, which is 6.54% of the company's 137.64M share float. Might be undervalued at current levels, with a PEG ratio at 0.79, and P/FCF ratio at 7.59. The stock is a short squeeze candidate, with a short float at 28.76% (equivalent to 10.62 days of average volume). The stock has gained 18.92% over the last year
3. Molson Coors Brewing Company (TAP): Distributes beer brands. Market cap of $7.37B. Debt/Equity at 0.25. Net institutional shares purchased over the current quarter at 7.9M, which is 5.31% of the company's 148.81M share float. Offers a good dividend, and appears to have good liquidity to back it up--dividend yield at 3.14%, current ratio at 1.55, and quick ratio at 1.4. The stock has lost 14.8% over the last year.
4. Abercrombie & Fitch Co. (ANF): Operates as a specialty retailer of casual apparel for men, women, and kids. Market cap of $4.98B. Debt/Equity at 0.01. Net institutional shares purchased over the current quarter at 4.3M, which is 5.01% of the company's 85.80M share float. The stock is currently stuck in a downtrend, trading 16.23% below its SMA20, 15.28% below its SMA50, and 14.58% below its SMA200. The stock has performed poorly over the last month, losing 19.29%.
5. Chipotle Mexican Grill, Inc. (CMG): Develops and operates fast-casual, fresh Mexican food restaurants in the United States. Market cap of $10.24B. Debt/Equity at 0. Net institutional shares purchased over the current quarter at 975.6K, which is 3.17% of the company's 30.76M share float. The stock has gained 41.96% over the last year.
6. Titanium Metals Corporation (TIE): Mills, manufactures, and distributes titanium and titanium alloys. Market cap of $2.78B. Debt/Equity at 0. Net institutional shares purchased over the current quarter at 2.7M, which is 3.08% of the company's 87.58M share float. The stock has lost 9.21% over the last year.
7. Tiffany & Co. (TIF): Engages in the design, manufacture, and retail of fine jewelry worldwide. Market cap of $9.96B. Debt/Equity at 0.29. Net institutional shares purchased over the current quarter at 3.0M, which is 2.48% of the company's 121.15M share float. The stock has gained 41.46% over the last year.