Have you ever wanted to chat with the world’s smartest hedge fund managers?
How do they think? What are they worried about? Where do they find their best investment ideas?
Unfortunately, most of us will not be able to sit down with legendary investors like George Soros or Warren Buffett. However, it has never been easier to track the trading decisions of the globe’s top financiers.
Thanks to SEC regulations, these investors must publicly disclose their holdings every quarter. Although there is certainly a time lag, it still provides a useful window into the minds of these top investors.
Which stocks are they buying now? Notably, smart money managers are trolling through some of the market’s most hated names in search of value. Let’s take a look at their top stock picks.
1. Yamana Gold
It’s ugly at Yamana Gold (TSX: YRI)(NYSE: AUY). Over the past nine months, the gold miner has lost over a third of its value and the company is trading at its cheapest level on many financial metrics in over a decade. However, there are some signs that a bottom is in place.
That said, Yamana is now a popular name amongst hedge funds. A number of notable investors — including George Soros, Frank Brosens, and Mark Broach — all initiated new positions in the company last quarter. Other money managers like Ken Griffin, David Dreman, and Curtis Macnguyen increased the size of their positions in the mining giant.
There are also some positive developments taking place at the company itself. Investors like Yamana’s recent acquisition of Osisko Mining for its low-risk, low-cost assets. Also, management has made a lot of progress cutting costs and selling off unprofitable assets. Expect these efforts to show up in the company’s financial results in upcoming quarters.
It may seen odd that hedge funds are bullish on nuclear power following the Fuskshima disaster in 2011. However, a number of money managers see value in the space and are making sizeable bets on the industry.
Last quarter, several money managers initiated positions in uranium mining giant Cameco (TSX: CCO)(NYSE: CCJ), including Stanley Druckenmiller, Joe Huber, and Michael Novogratz. Other hedge fund titans like George Soros, David Iben, and Israel Englander boosted their stakes in the company.
The bottom line is that uranium prices must rise or the lights will go out. At today’s prices, miners are losing money on every pound of uranium they pull out of the ground. If prices don’t rally soon, small producers will go bust, larger miners will halt operations, and no investments will be made into future production. These are exactly the type of conditions that led to supply shortages in 2007.
Of course, not every uranium stock will be a winner. Only large producers with sufficient size and scale, like Cameco, will survive. That seems to be exactly how hedge funds see this situation playing out.
As regular readers know, Encana (TSX: ECA)(NYSE: ECA) is in the midst of a turnaround. New Chief Executive Doug Suttles is attempting to whittle down the company’s sprawling asset base to focus on a few core properties. Rather than specialize in low-price natural gas, Suttles wants to transition into a more profitable liquids and oil-rich production mix.
Wall Street is clearly buying into the new plan. Last quarter, a number of famed value investors, including Steven Cohen, Ken Griffin, and Martin Whitman, increased their positions in the natural gas producer. Since Suttles joined the company last summer, Encana has been one of the best performers on the Toronto Stock Exchange, up almost 40%.
Good things are also starting to show up in the company’s financial results. Last quarter, cash flow and operating profits grew 87% and 192% year over year. However, the company still has a long way to go before completing its turnaround. That suggests that Encana shares still have a lot of untapped upside.