The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (Insider Monkey) -- Hedge funds will disclose their end of first-quarter holdings next week, although we can still track hedge funds' transactions through Form 4, 13D and 13G filings. We don't get to see their entire portfolio in these filings, but we get to see recent transactions in their large positions. Here are the stocks hedge funds bought recently:
Apple (AAPL): Dan Loeb's Third Point previously sold out its position in Apple during the second quarter of 2011, then decided to buy back those shares at a substantially higher price of $445 a share after Apple's fourth-quarter earnings announcement. Here is how Loeb explained his Apple investment thesis in Third Point's quarterly investor letter:
URS (URS): Larry Robbins filed a 13G last week disclosing a 3.9 million share position in URS. Glenview Capital had 3.55 million shares of URS at the end of December. Howard Marks' Oaktree Capital (OAK) is a new favorite for several hedge funds. Greenlight Capital filed a 13G last week, disclosing a 1.68 million share position. Einhorn's $70 million investment in the company gives him a 5.5% stake. Russell Hawkins' Hawkins Capital holds an even larger position. Barnes & Noble (BKS): You probably heard that Barry Rosenstein's Jana Partners disclosed a 7 million share position in Barnes & Noble. The stock went up dramatically after the company inked a deal with Microsoft (MSFT). Hours after the announcement Rosenstein was busy selling 1 million shares of Jana's holdings at an average price of $24.42 (read the details here). Zillow (Z) and Yelp (YELP): Billionaire hedge fund manager Steven Cohen disclosed a 5% stake in Zillow and a 5.1% stake in Yelp this week. Ingersoll-Rand (IR) Nelson Peltz disclosed a 7+% activist position in Ingersoll-Rand this week. Ingersoll-Rand wasn't a popular stock among hedge funds at the end of December. Mason Hawkins' Southeastern Asset Management was the only fund we track with a $100 million-plus position. Nelson Peltz's current position in the stock is valued at more than $900 million.
"As we evaluated Apple at $445 per share, some back‐of‐the‐envelope math painted an intriguing picture. Due to its favorable working capital cycle and deferred revenue contribution, Apple has been churning out cash flow at close to 120% of earnings (actually 128% in FY2012). Looking forward to CY2012, that rate suggests cash flow in excess of $50 per share in 2012. Ignoring repatriation tax for a moment, at $445 per share less $104 per share in net cash, we were creating Apple at 6‐7x CY2012 free cash flow. Looking toward year‐end 2012, with over $150 per share in net cash, Apple's multiple dropped to 5‐6x CY2012 free cash flow. As a result, we believed we were buying in with a healthy margin of safety, a likely cash return catalyst and a favorable product cycle. This strong cash position and cash flow made the prospect of a cash return strategy very likely. Even allowing for a healthy sense of skepticism, Apple's close to $100 billion of net cash is greater than that of Microsoft, Google, Facebook and Nokia combined."
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