Alibaba, Dollar General and 3 Other Stocks Big Hedge Funds Hated Last Quarter

NEW YORK (TheStreet) -- Which stocks did big hedge fund managers shy away from in the first quarter?

Hedge funds hated information technology stocks, with $1.19 billion in net sells last quarter, followed by consumer staples companies with $299 million in net sells, according to S&P Capital IQ's, a division of McGraw Hill Financial (MHFI), quarterly hedge fund tracker. The report analyzes Securities and Exchange Commission 13-F filings by the 10 largest hedge funds by asset size to spotlight big buying and selling trends.

Among the most sold stocks were Alibaba (BABA) and Dollar General (DG), with $1.1 billion and $900 million in net sales, respectively, said S&P Capital IQ.

On the flip side, big hedge fund managers poured nearly $5 billion into health care stocks, last quarter. Following health care stocks, hedge fund managers put $1.47 billion investing dollars into the industrial sector as well as $1.13 billion into energy stocks, despite the oil price slump.

Check out the five stocks with the biggest sell off by hedge fund managers. TheStreet highlights notable sold positions on each of the five stocks, pairing the companies with ratings from TheStreet Ratings. And when you're done be sure to check out hedge funds' biggest buys last quarter.

TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Note: Year-to-date returns are based on May 20, 2015 closing prices.

DLTR Chart DLTR data by YCharts

5. Dollar Tree (DLTR)
Market Cap: $16.2 billion
Year-to-date return: 8.4%
Who Sold?: Viking Global Investors

Viking Global sold nearly 6 million shares of Dollar Tree last quarter. Viking Global's stake -- at 1.2 million shares -- is worth $91.4 million.

TheStreet Ratings: Buy, A
TheStreet Ratings said:
"We rate DOLLAR TREE INC (DLTR) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • DLTR's revenue growth has slightly outpaced the industry average of 2.2%. Since the same quarter one year prior, revenues rose by 10.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The current debt-to-equity ratio, 0.42, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.00, which illustrates the ability to avoid short-term cash problems.
  • 39.28% is the gross profit margin for DOLLAR TREE INC which we consider to be strong. It has increased from the same quarter the previous year.
  • DOLLAR TREE INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DOLLAR TREE INC increased its bottom line by earning $2.90 versus $2.75 in the prior year. This year, the market expects an improvement in earnings ($3.49 versus $2.90).
  • Net operating cash flow has increased to $538.30 million or 26.15% when compared to the same quarter last year. Despite an increase in cash flow, DOLLAR TREE INC's average is still marginally south of the industry average growth rate of 30.18%.
TMO Chart TMO data by YCharts

4. Thermo Fisher Scientific Inc. (TMO)
Market Cap: $52.7 billion
Year-to-date return: 5.4%
Who Sold?: Glenview Capital Management, Viking Global Investors

Glenview Capital sold 4.5 million shares. Its stake -- at 6.9 million shares -- is worth $912 million. Viking Global sold 2.3 million shares. Viking's stake of 3.5 million shares is worth $466 million.

TheStreet Ratings: Buy, A-
TheStreet Ratings said:
"We rate THERMO FISHER SCIENTIFIC INC (TMO) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, expanding profit margins, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • TMO's revenue growth has slightly outpaced the industry average of 2.8%. Since the same quarter one year prior, revenues slightly increased by 0.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The gross profit margin for THERMO FISHER SCIENTIFIC INC is rather high; currently it is at 51.49%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 9.82% trails the industry average.
  • The debt-to-equity ratio is somewhat low, currently at 0.75, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.50 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

 

BABA Chart BABA data by YCharts

3. Alibaba Group (BABA)
Market Cap: $229 billion
Year-to-date return: -12.7%
Who Sold?: Third Point LLC, Paulson & Co., Silver Lake Partners

Both Third Point and Paulson sold out of their positions in Alibaba, selling 10 million shares and 1.92 million shares of the Chinese e-commerce company last quarter. Silver Lake sold 25 million shares, still leaving the firm with nearly 30 million shares, worth $2.73 billion.

TheStreet Ratings: no ratings available

DG Chart DG data by YCharts

2. Dollar General (DG)
Market Cap: $22.3 billion
Year-to-date return: 3.1%
Who Sold?: Glenview Capital

Glenview Capital sold 2.4 million shares of Dollar General last quarter. Its stake of 4.6 million shares is worth $335 million.

TheStreet Ratings: Buy, A
TheStreet Ratings said:
"We rate DOLLAR GENERAL CORP (DG) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, growth in earnings per share, increase in net income and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • DG's revenue growth has slightly outpaced the industry average of 2.2%. Since the same quarter one year prior, revenues slightly increased by 9.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 30.61% over the past year, a rise that has exceeded that of the S&P 500 Index. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • DOLLAR GENERAL CORP has improved earnings per share by 15.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, DOLLAR GENERAL CORP increased its bottom line by earning $3.50 versus $3.17 in the prior year. This year, the market expects an improvement in earnings ($3.95 versus $3.50).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Multiline Retail industry. The net income increased by 10.3% when compared to the same quarter one year prior, going from $322.17 million to $355.37 million.
  • Net operating cash flow has slightly increased to $474.20 million or 4.79% when compared to the same quarter last year. Despite an increase in cash flow, DOLLAR GENERAL CORP's cash flow growth rate is still lower than the industry average growth rate of 30.18%.
VRX Chart VRX data by YCharts

1. Valeant Pharmaceuticals (VRX)
Market Cap: $78.3 billion
Year-to-date return: 59.6%
Who Sold?: Viking Global Investors, Lone Pine Capital

Viking sold 5 million shares, leaving it with 4 million shares worth $935 million. Lone Pine sold 2.7 million shares last quarter, leaving it with 5.6 million shares worth $1.28 billion.

TheStreet Ratings: Buy, B
TheStreet Ratings said:
"We rate VALEANT PHARMACEUTICALS INTL (VRX) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. We feel its strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 8.0%. Since the same quarter one year prior, revenues rose by 16.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • VALEANT PHARMACEUTICALS INTL reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, VALEANT PHARMACEUTICALS INTL turned its bottom line around by earning $2.67 versus -$2.62 in the prior year. This year, the market expects an improvement in earnings ($11.10 versus $2.67).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Pharmaceuticals industry. The net income increased by 426.1% when compared to the same quarter one year prior, rising from -$22.60 million to $73.70 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market, VALEANT PHARMACEUTICALS INTL's return on equity exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has slightly increased to $491.10 million or 1.40% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -21.42%.

 

 

 

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