Here's How to Spy on the Market's Biggest Movers and Shakers...

Having a rough year?

Quit whining, you pansy. At least you’re not Bill Ackman…

The legendary activist investor’s Pershing Square Holdings portfolio has lost roughly 25% this year. Big Boy Bill has made some bad bets recently, most notably Valeant Pharmaceuticals—which has dropped from more than $240 per share to less than $100 in a matter of weeks.

It’s always fun to mock the big fish when they’re losing. But guys like Bill Ackman didn’t become billionaires by accident. These hedge fund sharks are, for the most part, ruthless geniuses. Most of the time, they win. And they win big…

Wouldn’t you like to ride their coattails to victory?

Of course you would. You’d be a damned fool not to.

So today we’re taking a look at some of the most popular stocks among the smartest guys in the room. And riding their coattails will allow you to rack up some impressive gains…

These hedge fund hotels, as they’re commonly known, are all recognizable large-cap stocks. But a few of the names will probably surprise you.

Let’s dive in…

First, let’s talk about the rejects. These are the stocks that hedge funds are predominantly selling. Topping this list, according to FactSet, are AT&T and Apple shares.

Funds dumped $3.2 billion worth of AT&T during the third quarter, FactSet reports.

“The top 50 funds also removed large chunks of Apple from the aggregate portfolio,” FactSet says. “The iPhone maker saw aggregate sales amounting to $1.2 billion in Q3. Discovery Capital Management, Citadel Advisors, D.E. Shaw Group, Millennium Management, EgertonCapital, and Coatue Management all contributed to the decline, as each sold more than $100 million worth of stock in Q3.”

In fairness to both AT&T and Apple, neither of these stocks are spiraling lower. But both have failed to get anywhere close to their summer highs during the market’s recent recovery. I’m sure all those funds dumping shares during the third quarter had something to do with it…

Hedge Fund Rejects

But enough with these scorned ex-girlfriends of the hedge fund world.

What are the pros buying?

For starters, they’re plunging headfirst back into healthcare stocks. FactSet notes that the top 50 hedge funds bought a whopping $16.3 billion worth of stock in the health care sector during the third quarter. That’s a lot of pharma stocks that took hits during the market’s slide earlier this year. That includes names like Teva Pharmaceutical and Allergan.

Big Pharma Finds Big Money Buyers

Note that both of these names are performing better than the recently dumped AT&T and Apple positions year-to-date. There’s still plenty of work to be done. But big money buying the third quarter dip is helping these stocks regain their footing as we draw closer to the end of the year.

Sincerely,

Greg Guenthner
for The Daily Reckoning

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