Individual investors can learn a lot about stocks to watch by looking at the activity of institutional investors. An institutional investor is defined as “a company or organization that invests money on behalf of other people.” Therefore, while hedge funds and investment banks operate as different business entities, they fall under the institutional investor basket. Insurance companies, pension funds, and endowment funds are also institutional investors. Today, institutional investors make up more than 90% of all stock trading activities.
Institutional investors are seen as having a strong advantage over retail investors. why? Institutional investors have access to resources not available to the average retail investor. Takes Well Rock Capital, which is one of the best performing hedge funds, for example. In an interview, CEO and Founder Alex Sacerdote explained that:
“We do 1,000 face-to-face meetings a year despite being a team of only five. I think we traveled close to 250,000 miles last year. We go to Asia three or four times a year. We recently traveled to India to meet with 30 private and public Indian internet companies.”
As a hedge fund with $24 billion in assets under management (AUM), Whale Rock can visit each company and speak with its executives before making an investment. This provides tremendous value, as company executives are more likely to provide more detail in a face-to-face meeting with a potential multibillion-dollar investor than in a quarterly conference call.
So why should retail investors care about institutional investors if we can’t travel thousands of times a year to interview CEOs? This is where the 13D and 13G form come in. Institutional investors must file either Form 13D or 13G when acquiring ownership of a company of 5% or more.
As retail investors, we can take advantage of the 13D and 13G formats by knowing what high-performing institutions are buying, albeit with a slight delay.
With that in mind, here are five stocks to watch for recent institutional investors.
- Carvana (New York Stock Exchange:CVNA)
- GoodRx Holdings (NASDAQ:GDRX)
- Southwest Airlines (New York Stock Exchange:love)
- HubSpot (New York Stock Exchange:axles)
- Discover connections (NASDAQ:tablet)
Stocks to watch: Carvana (CVNA)
Carvana underperformed in 2021, falling 3% and lagging Standard & Poor’s 500 26% annual return by a large margin. However, 2020 was a standout year for CVNA stock, as it returned 160%. In addition, Carvana has been a major beneficiary of Covid-19 as interested car buyers have flocked to the Carvana app and website instead of the traditional dealerships. After 2021 Carvana experienced a fundamental recession, two large multi-billion dollar organizations benefit from the lackluster performance of CVNA stock.
In a revised 13G filing received by the US Securities and Exchange Commission (SEC) on January 12, Billy Gifford Increased its current position in Carvana by 620,641 shares, or 6.8%. Baillie Gifford boasts assets under management (AUM) of $191 billion. Furthermore, the fund is a long-term investor and holds each position for an average of 10.43 quarters. Following the purchase, the UK-based institutional investor now owns 11.28% of all Carvana’s outstanding shares. It’s safe to say Baillie Gifford is optimistic about the future of car e-commerce.
The second billion-dollar institutional investor to pick up CVNA stock is Fidelity and Research Department. In a revised 13G filing received January 10, FMR increased its current position in Carvana by approximately 2,302,683 shares, or approximately 33%. The fund now owns 10.86% of all Carvana shares outstanding. FMR manages $1.2 trillion in assets under management and holds each position in its portfolio for an average of 21.94 quarters.
GoodRx Holdings (GDRX)
Like Carvana, GoodRx disappointed in 2021.
After reaching an all-time high of $59 in February, GDRX stock closed the year around $32. GoodRx operates as a consumer-facing digital healthcare platform. The platform is free to use without the need to register. Instead, GoodRx collects revenue through referral fees and advertising. In addition, the platform helps consumers compare prescription drug prices and discounts from multiple sellers in order to find the best-priced selection. The GoodRx website notes that “the cost of a prescription may vary by more than $100 between pharmacies across the street from each other!” Since its inception, GoodRx has helped consumers save $35 billion on healthcare and pharmaceuticals. Now, GoodRx is attracting the attention of a major investment bank.
Morgan Stanley (New York Stock Exchange:missForm 13G was submitted on January 7. The filing states that the investment bank has acquired 1,1556,961 shares of GDRX stock after previously holding zero shares in the healthcare platform. In addition, the purchase of Morgan Stanley signifies ownership of 14.2% of all outstanding shares.
Notably, Ricky Goldwasser, an analyst at Morgan Stanley, has a $41 price target for GDRX stock. This means that the upside is more than 50% of the current prices.
Stocks to watch: Southwest Airlines (LUV)
Airlines such as Southwest Airlines have seen volatile price movements since the onset of Covid-19.
Now, with the start of the omicron variant, airlines have to cancel thousands of flights due to staff shortages and other extenuating circumstances, such as the weather. From January 4-5, Southwest Airlines canceled more than 1,200 flights, more than any other airline in that time period. However, data from FlightAware shows that global arrivals via aircraft increased by 10% this week compared to the previous week. This is a small glimmer of hope for an industry that has been hit hard by the drop in air travel. However, an established investment firm is now taking advantage of Southwest Airlines’ current predicament.
In a modified 13G file received January 10, Vanguard Group It reported that it has raised its current position in Southwest Airlines by 10,227,315 shares, or roughly 20%. After the purchase, The Vanguard Group now owns 10.44% of LUV’s shares, which equates to 61,814,978 shares.
According to the latest ADV model, The Vanguard Group manages more than $6.6 trillion in AUM. The investment firm holds each position in its portfolio for an average of 39.14 quarters. Therefore, Vanguard’s average holding period indicates that the company is committed to the LUV stock over the long term.
HubSpot’s stock has been on a rampage since pandemic lows in March 2020. The marketing software solutions company gained more than 65% in 2021 amid a scramble to increase its digital marketing solutions.
However, a recent short report published by a prominent hedge fund sent shares of HubSpot to the kennel. On December 22 Kirsdale Capital It released a short report alleging that HubSpot is overvalued compared to its peers and slowing in growth with low profit margins. Kerrisdale also highlighted that competitors to HubSpot are gaining market share, such as Clavio And Mailchimp. Since then, HUBS’ stock has fallen an astonishing 33%. Despite Kerrisdale’s short report, a popular investment firm is now buying HubSpot stock.
in january. 10, T. Ru price (NASDAQ:TROWA modified 13G model was introduced. The model stated that after the purchase, T. Rowe Price now owns 10.40% of HubSpot’s shares, or 4,922,119 shares.
Stocks to watch: Discovery Communications (DISCA)
Another stock to watch is Discovery Communications, a multinational media company that engages in factual content across several distribution platforms. Last year, the media company was arrested in Archegos fiasco.
In 2021, DISCA shares soared to $79, which investors attributed to Archegos bidding for the stock on a leveraged basis. Later that year, the highly leveraged Archegos positions turned against the fund, and as a result, Archegos had to liquidate the entire DISCA position. DISCA shares have fallen rapidly, and the company is now trading at $31 a share, a far cry from its 2021 highs.
In the midst of selling, such as investment banks Swiss credit (New York Stock Exchange:CS) suffered a lot of damage. This is because Credit Suisse and other banks have sold swaps to Archegos. Swaps allow funds like Archegos to be exposed to shares without actually owning them. The property is in the hands of the bank that sells the swaps. However, a New York hedge fund with more than $2 billion in assets under management is now benefiting from lower DISCA share prices.
In a 13G filing received by the Securities and Exchange Commission on January 7, Brahman Capital It stated that it had purchased 8,907,654 shares of DISCA stock. The purchase represents 5.26% of the ownership stake in Discovery. Brahman Capital has an average holding period of 4.76 quarters, which indicates that Brahman believes DISCA stock will bounce higher this coming year.
At the date of publication, Eddie Bann has not (directly or indirectly) held any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author, and are subject to InvestorPlace.com’s posting guidelines.