Top Stocks Hedge Funds Have Been Buying – and Selling

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Managers of hedge funds spend most of their time evaluating stocks, so it's usually a good idea to keep an eye on what they're buying and selling.

If nothing else, trends among fund managers can move stocks in both directions. Apple Inc. (Nasdaq: AAPL) is a textbook case.

Billions of dollars in hedge fund money played a major role in pushing Apple stock to its highs last year, and contributed to its fall in the fourth quarter as many fund managers reversed their position.

Of course, many retail investors like to follow what the hedge funds are doing because their moves can often point to hot stocks or hot sectors.

Contrarian investors like to know where the big money is going so they can bet in the opposite direction.

The best way to follow the stock choices of hedge funds is to study their quarterly 13F filings with the Securities and Exchange Commission (SEC).

So here's a look at what has been moving in and out of hedge funds recently.

Five Stocks Hedge Funds Have Been Buying

Using data from the Website WhaleWisdom.com, which tracks the 13F filings of more than 5,500 hedge funds, here are the stocks that saw the biggest increases in ownership among hedge funds in the last few months of 2012:

  • iShares MSCI Emerging Markets Index (NYSEARCA: EEM): Somewhat surprisingly, the list is topped not with a stock, but an exchange-traded fund (ETF) focused on emerging markets. The influx of money helped this ETF gain 7.33% in Q4, with most of the gain coming in December. Hedge fund ownership in the ETF more than doubled – it rose 103.4% — in the quarter.
  • Facebook Inc. (Nasdaq: FB): With its troubled IPO and questionable business model, many investors have shied away from Facebook stock. Not hedge funds. In the last quarter of 2012, ownership in FB increased 93.02%. There were 263 funds creating new positions and 253 funds adding to positions, compared with just 94 closing out positions and 113 reducing positions. Maybe that's why Facebook popped 31% in Q4.
  • UBS AG (NYSE: UBS): Hedge funds increased positions in this Swiss bank by 24.2%. Still recovering from its near-death experience in 2007-2008, UBS has suffered several troublesome incidents since. So one would think that hedge funds would approach this stock cautiously, but the number of shares owned rose by nearly 111 million. UBS stock rose nearly 26% in Q4.
  • Ford Motor Co. (NYSE: F): Ownership in Ford rose 23.7%, helping push the stock up more than 29% in the fourth quarter. Unlike UBS and Facebook, however, Ford has been making all the right moves in recent years, and was the only big U.S. automaker not to need government bailout money during the financial crisis.
  • American International Group Inc. (NYSE: AIG): The insurance giant is still trying to patch up its tattered public reputation following its role in the financial crisis, but hedge funds don't make bets based on company reputations. Hedge fund shares increased 18.83% in the quarter, helping to nudge AIG up more than 6%.

Five Stocks Hedge Funds Were Selling

  • America Movil S.A.B. de CV (NYSE: AMX): This Mexico-based telecommunications giant made billionaire Carlos Slim the richest man on Earth, but hedge funds must have smelled trouble, as shares owned fell 10.12%. In recent weeks, AMX shares have plunged over 25% as Mexico considers reforms that will loosen the company's iron grip on that nation's mobile phone market.
  • The Western Union Co. (NYSE: WU): The venerable money movement and payment services company lost favor with hedge funds to the tune of an 8.87% reduction in shares owned. Again the hedge funds seem to be defying conventional wisdom. Despite the competition from EBay's PayPal and others, Western Union is still by far the biggest player in the money transfer industry.
  • Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE ADR: TSM): Despite a nice 10% rise in the fourth quarter, hedge fund managers reduced shares in this chipmaker – the world's largest — by 7.62%. Apparently, weak results last year soured hedge fund managers on TSM, but if an expected turnaround in the chip market materializes, those hedge funds might have wished they had hung on to those shares.
  • CVS Caremark Corp. (NYSE: CVS): Hedge fund ownership in the big drug store chain dropped 6.06% in the final months of 2012, which hasn't worked out well for the fund managers, as CVS has risen 11.52% so far in 2013. Strong earnings and guidance drove the stock to new 52-week high this week.
  • Schlumberger Limited (NYSE: SLB): Hedge funds must have noticed the lagging earnings growth and thin profit margins with the oil and gas equipment and services giant last quarter, trimming ownership by 5.25%. That contributed to a stock slide of 5.38%, but again, the fund managers must have been kicking themselves, as SLB has risen 11% year to date.

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  1. H. Craig Bradley | April 5, 2013

    HEDGE FUNDS ARE YESTERDAY'S FAD

    Even the pros are not always all that good on their individual stock picks. They get it wrong. So, maybe their returns are not completely honest or all that good either. It would be interesting to see what the management expenses of various hedge funds are as a percentage of fund assets. You could compare a given hedge fund to a comparable mutual fund or index fund to see if the net gains justify the hefty management fees. A good chance they do not. Hedge funds probably do not want the public to know how they are doing performance wise. Black boxes are easier to hide out in.

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