The FTSE 100 hasn’t had a reputation for outstanding returns recently. But recent 13F filings indicate that high-powered hedge funds have been opportunities in the UK.
By itself, this isn’t a reason to buy (or sell) a stock. But looking at what the smart money has been doing can be a source of ideas that might be worth a closer look.
Ashtead
Dodge & Cox is a value-focused investment operation. And during Q3, the firm bought around 2.3m shares of industrial equipment leasing company Ashtead (LSE:AHT).
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So far, that move has worked out very nicely – the stock is up 7.5% since the end of September. The main reason for this is the outcome of the US election.
Over 85% of the company’s revenues come from across the Atlantic. That kind of geographic focus can be a risk, but strong US industrial activity could be a big boost for the FTSE 100 firm.
Demand for industrial equipment is highly cyclical. And that means I think price-to-book (P/B) is a better metric to use than price-to-earnings (P/E) when it comes to valuing Ashtead shares.
Ashtead P/B ratio Nov 2023 – Nov 24
Created at TradingView
On this basis, the stock hit its lowest levels of the year between June and August. So even without forecasting the election result, it might have looked like a good time to be buying.
The recent rally has seen the multiple climb back to the top end of its 12-month range. That’s something investors should consider before deciding whether or not to follow Dodge & Cox.
Lloyds Banking Group
Maverick Capital opened a position in Lloyds Banking Group (LSE:LLOY) during Q3. The firm has investments in over 200 companies, but there’s a reason I think this is interesting.
The stock is currently 4.5% lower than where it ended the third quarter. This is mostly due to a court ruling against Close Brothers in a case of commissions for car loans.
Lloyds has significant exposure to this area, but this isn’t news. What’s changed recently is that the risk of significant liabilities has increased as a result of the ruling against Close Brothers.
Unfortunately, investors won’t find out whether Maverick has done anything in response to this until February. That’s the limitation of 13F filings – they’re only updated quarterly.
That’s another reason to not just follow hedge funds into stocks. But I don’t think this makes information about what hedge funds have been buying entirely worthless.
The fact the firm decided to buy Lloyds, rather than – for example – Barclays is interesting to me. If nothing else, it gives me a reason to take a closer look and see if I can figure out why.
Investment ideas
A lot of investors use 13F filings to pay attention to what Warren Buffett has been buying. But I think there are plenty of high-powered investors that are worth paying attention to.
A number of these have seen opportunities in FTSE 100 stocks recently. And while this by itself isn’t a good enough reason for me to buy a stock, I don’t mind taking a closer look.
