Finding the rightinvestment can be a challenge for anyone,
especially during a downeconomy . But many don't realize that the
research has already been done for you.
If you've read my articles, then you knowmarket
-- hedge funds. And right now, there is a good reason to
keep a close eye on the latest trades by some of the major hedge
As we head into the end of the year, hedge funds are feeling the
pressure to createalpha -- the market-beating returns for which
they are known. The sector has had the worse year since 1997, with
overall gains of more than 5% in the first nine months of 2012,
compared with the S&P 500's roughly 21% in the same period.
Simply put, hedge funds are scrambling to achieve the typical
performance that's their claim to fame. This means some of these
funds are especially focused on the stocks they thinkwill
outperform the market for sure.
And you won't believe which two stocks they are after…
Yahoo! (Nasdaq: YHOO)
This Web stock has been ripping higher since the start of
September. Legendaryhedge fund manager David Einhorn, known for his
amazingshort selling skills, purchased 5 millionshares of the stock
in the third quarter. Interestingly, he had dumped his position in
Yahoo! at the first of the year and then bought back into the
company during the last quarter. Since then, shares have been
Yahoo was just placed on the
Goldman Sachs (
conviction "buy" list, which is a lofty position for any stock.
Yahoo's newCEO Marissa Mayer has been accepted with open arms
onWall Street as the company continues to outperform other tech
bellwethers such as
Microsoft (Nasdaq: MSFT)
Google (Nasdaq: GOOG)
What makes Yahoo very appealing right now is its share buyback
program. This year alone, Yahoo has repurchased 54 million shares
for $860 million. There is another $2.8 billion in profits from the
sale of Yahoo's stake in the Alibaba Group, which are slated for
share buybacks. This kind of cash being used in an
investor-positive, prudent manner, assures future upside for the
company. I can easily see this stock above $25 within the next 12
Energizer Holdings (
One of the most interesting and educationalhedge fund conferences
of the year is the annual Value Investing Congress. At this
conference, hedge fund managers talk about their holdings and
opinions. Interested investors can attend the conference to learn
firsthand what top hedge fund managers are thinking.
At the conference, manager Alexander Roepers of
AtlanticInvestment Management , recommended battery and personal
care product maker Energizer Holdings as a great buy. His firm owns
2.5 million shares of the company and just ramped up its holdings
by more than 300,000 shares in the third quarter. He cited a
shareholder positive management group, a strategic franchise and
predictable cash flows as reasons for his bullishness. Energizer
boasts amarket capitalization of $4.8 billion, has a strong record
of earnings-per-share (EPS ) growth and expandingprofit margins.
However, shares are just breaking even on the year. This spells a
nice entry point for investors.
Taking a look at the technical picture, shares are pushing
toward resistance at $80. This stock is a clear breakout buy
candidate at a daily close above $80. Roeper forecasts Energizer
Holdings to reach $100 within 18 months, which sounds
Risks to Consider:
Hedge funds are not always right with their stock picks. Hedge
fund interest simply provides a starting point for investors to do
their owndue diligence when picking stocks. Regardless of what the
hedge fund gurus preach, always use stops and position size
properly based on your risk tolerance when investing.
Action to Take -->
I like both stocks as long-terminvestments . Yahoo is a great buy
right now, while Energizer Holdings is best entered as a breakout
play above $80.
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