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I FTSE 100 he has not had a reputation for outstanding returns recently. But recent 13F filings show that more powerful hedge funds have become opportunities in the UK.
By itself, this is not a reason to buy (or sell) the stock. But looking at what the smart money has been doing can be a source of ideas that may be worth a closer look.
Ashtead
Dodge & Cox is a value-oriented investment practice. And during Q3, the company bought about 2.3m shares of the industrial equipment leasing company Ashtead (LSE: AHT).
So far, that move has worked pretty well — the stock is up 7.5% since the end of September. The main reason for this is the result of the American election.
More than 85% of the company’s revenue comes from across the Atlantic. That kind of geographic concentration can be dangerous, but strong US industrial activity could be a big boost for an FTSE 100 company.
Demand for industrial machinery is highly cyclical. And that said, 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 in TradingView
On this basis, the stock hit its lowest levels of the year between June and August. So even without predicting the outcome of the election, it might seem like a good time to buy.
The recent rally has seen many gains return to the high end of the 12-month range. That’s something investors should consider before deciding whether or not to pursue Dodge & Cox.
Lloyds Banking Group
Maverick Capital opened a position on 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 because of the opposing court decision Close Brothers in the case of car loan commissions.
Lloyds has significant exposure in this area, but it is not news. What has changed recently is that the possibility of large debts has increased due to the decision against Close Brothers.
Unfortunately, investors won’t find out if Maverick has responded to this until February. That’s the 13F filing limit – it’s updated every quarter.
This is another reason not to just follow hedge funds in stocks. But I don’t think this makes sense about whether hedge funds have been buying in vain.
The fact that the company decided to buy Lloyds, rather than – for example – Barclays it’s interesting to me. If nothing else, it gives me reason to take a closer look and see if I can figure out why.
Investment ideas
Many investors use 13F filings to pay attention to what Warren Buffett has been buying. But I think there are a lot of high-powered investors that deserve attention.
Many of these have seen opportunities in FTSE 100 stocks recently. And while this in itself isn’t reason enough for me to buy the stock, I don’t mind taking a closer look.
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