3 Value Stocks The Big Money Is Buying
Big money investors, like hedge fund managers and other professionals, love to buy value stocks. Following the wisdom of buying when everyone else is selling, they often make their moves when everyone else has thrown in the towel on a company.
They’re also able to successfully make these moves because of research teams and insider access that are far superior to what the everyday investor has at his or her disposal. If we want to make similar gains, then the obvious move is to follow in the footsteps of these investing giants.
While we can’t access their private and often ultra-expensive research data, we do know what these winning investors are buying or selling thanks to SEC filing regulations.
I have sifted through a multitude of big-money value stocks to present my three favorite buys right now.
#-ad_banner-#1. EQT (NYSE: EQT)
EQT is an integrated energy company with hefty investments from George Soros’ Soros Fund Management and JANA Partners’ Barry Rosenstein. Soros recently added $67 million of EQT shares to his portfolio, accounting for 1.5% of his total stock holdings. Rosenstein added $586 million worth of the stock, increasing his holdings to just under 10% of JANA Partners’ portfolio.
These big-money players are confident in the stock despite shares being down over 8% this year. Third-quarter results came in strong, but shares fell 2% on the news. The price held just under the 200-day simple moving average (SMA), setting up an ideal technical buy opportunity. Here’s a closer look at the company…
This Pittsburgh-based, $11 billion-plus market cap energy company is concentrating on natural gas supply activities in the Appalachian area as well as eastern and western coastal regions of the United States.
A close-to $7 billion acquisition of Rice Energy will turn EQT into the largest natural gas producer in the United States. Production will ramp up to over 3.5 billion cubic feet equivalent per day from the current 1.3 billion after the acquisition. The move will also reduce operating costs by more than $2 billion annually.
The company has a goal of ramping up well development, using cash on hand and operating cash flow to further increase production. Big money is apparently betting that when natural gas starts to tick higher, EQT will be the ideal stock to maximize the upside.
2. Hewlett Packard Enterprise (NYSE: HPE)
A legacy high-tech company whose shares are trading deep in the value zone, down over 40% in 2017. While the company is suffering due to commodity pricing pressure, competition, and M&A dilution, Jeffrey Smith of Starboard Value Fund is taking this opportunity to ramp up his holdings.
Smith, an activist investor, is known as the “investor CEOs fear the most” due to his take-no-prisoners approach to increasing shareholder value. Smith’s history of seizing control of struggling public companies and turning them around is a very decisive factor in Hewlett Packard’s case. He has recently doubled his position in the company, bringing his total stake to over $86 million.
David Einhorn, a better known activist investor, is also moving on the shares. With a $74 million stake, Einhorn is positioning himself to capture HPE’s upside.
HPE is planning to slash 5,000 jobs, increase focus on restructuring, and contain costs to turn the ship around. Also, substantial emphasis is being placed on product innovation and expanding 3D printing capability.
Often, the technical picture can identify things are happening with the stock that is not public knowledge. Shares have been erratically upward-trending since mid-July and are presently holding above both the 50- and 200-day SMAs.
Price movement tells me that more big money players than just Einhorn and Smith are accumulating the shares. Now is an ideal time for risk-embracing investors to jump on board.
3. Dillard’s (NYSE: DDS)
This $1.6 billion department store chain has been knocked lower by nearly 17% this year. Einhorn’s Green Light Capital is using the lower prices to snap up shares. He has increased his holdings by 33%, as reported by the last 13F filing, and the stock currently takes up nearly 2.5% of his portfolio.
Dillard’s is suffering, having missed estimates in six of the last eight quarters due to changing consumer preferences. In response, the company has increased focus on e-commerce initiatives, launching an omnichannel platform and capitalizing on growth opportunities in its brick-and-mortar stores.
In bullish news, the company boasts a healthy cash flow, allowing it to run with the improvements and repurchase shares. Dillard’s has also increased its dividend by 43%, proving its focus on shareholder management.
Risks To Consider: Big money investors can and do make mistakes when picking stocks. Always use stops and diversify regardless of the reputations of the insiders, funds, and professional investors owning shares.
Action To Take: Consider following big money investors by adding one or more of the above value stocks to your portfolio.
Editor’s Note: A few months ago, a group of millionaires and billionaires gathered in a private conference room 26 miles from Mar-a-Lago to discuss their “Trump Era” investments. And believe it or not, a common theme was to invest in American businesses. Seven companies in particular stood out… Full story here.