Trade Like Hot Hedge Fund Atticus Capital

In one of my first interviews with Jim Cramer this year for TheStreet.com TV, I asked him for his favorite hedge funds to follow. He named Atticus Capital.

Cramer recalled a time when he was skeptical of one of the fund's positions, but after management walked him through its due diligence he was impressed. It was remarkable, he said, the level of detail and work the fund had put into its research.

Atticus Capital was founded in 1995 by Timothy Barakett and Nathan Rothschild. The fund, which posted an annual return on assets of roughly 45% in 2005, focuses on value-orientated companies with improving fundamentals both domestically and internationally.

It lately has been coining money by taking large positions in companies that ultimately have received buyout offers. As an example, Atticus owned large positions in Phelps Dodge and TXU Energy -- both of which got huge premiums, netting Atticus around $750 million.

At Stockpickr we track Atticus Capital's main holdings, allowing you to follow its investments.

One of the keys for Atticus' success is its ability to find niche-based companies with improving fundamentals. For instance, it owns Eagle Materials(EXP), a Dallas-based company that makes gypsum wallboard and cement.

Because Eagle Materials trades at just 7 times EBITDA and sports a solid balance sheet, it can be argued that the company is underleveraged and perhaps even a candidate for a takeover by the likes of a USG.