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Billionaires Are Buying More of These 3 Stocks

By Patrick Morris - Dec 28, 2014 at 12:57PM

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Hedge funds have been buying more and more of these three stocks in recent months.

Want to know what stocks the biggest hedge funds in the country are buying? The numbers are in, and the results will surprise you.

The numbers
Each quarter, companies are required to disclose what stocks they've been buying and selling, and the Hedge Fund Tracker from S&P Capital IQ monitors what the 10 largest hedge funds -- with nearly $300 billion in total assets -- have been doing.

In the third quarter, along with Actavis and AbbVie -- which have been previously discussed -- the funds grew their existing positions in eBay (EBAY 2.93%), Pioneer Natural Resources (PXD 0.39%), and MasterCard (MA 0.88%), as shown in the chart below:

Company

Increase in Existing Position ($ millions)

Number of Companies

Actavis

$1,137

6

AbbVie

$989

4

eBay

$917

3

Pioneer Natural Resources

$581

3

MasterCard

$555

4

Source: Source: S&P Capital IQ Hedge Fund Tracker.

And what made the funds buy even larger stakes in those firms? Let's find out.

Icahn wins again
Apart from Actavis and AbbVie, the most in-demand company was eBay, and it doesn't take long to figure out why. Earlier this year, activist invest Carl Icahn began amassing a massive stake in the e-commerce giant, and a proxy fight ensued, as there was a continual bickering back and forth between Icahn and eBay's leadership.

But in April, the day it was revealed the fight was resolved -- eBay honored Ichan's request and nominated David Dorman, formerly of AT&T, to its board of directors.

Even though eBay requested its customers change their passwords as a result of a cyberattack, it still announced strong second-quarter results as its revenue jumped 13%.

Yet the biggest news came on the last day of the third quarter, as the company officially announced it would indeed spin off PayPal and the marketplace business of eBay into separate companies, which was one of Icahn's initial requests.

"For more than a decade eBay and PayPal have mutually benefited from being part of one company, creating substantial shareholder value. However, a thorough strategic review with our board shows that keeping eBay and PayPal together beyond 2015 clearly becomes less advantageous to each business strategically and competitively," eBay President and CEO, John Donahoe, said at the time of the announcement. "eBay and PayPal will be sharper and stronger, and more focused and competitive as leading, stand-alone companies in their respective markets."

While we don't know when the hedge funds grew their stakes in eBay (and what will soon be PayPal), one has to think the news of the spin-off of PayPal was a delight to the ears -- and wallets -- of Icahn and his hedge fund friends.

Buying up the barrels
Another popular company among the hedge funds was Pioneer Natural Resources, and Viking Global Investors grew its stake by 66% with a market value of nearly $1.4 billion at the end of the quarter.

What was the reason for the big buy? As fellow Fool contributor Matt DiLallo noted, Pioneer was the "best performing energy stock in the S&P 500 since 2009." Not only that, "its best days could still lie ahead" thanks to its high-margin business and seemingly unlimited growth potential. However, the stock was incredibly expensive relative to its peers, presenting a danger to investors.

Of course, that was then, and this is now, and thanks to plunging oil prices, Pioneer Natural Resources has also seen its stock plunge, falling by more than 25% since the end of September:

PXD Chart

While there are still some causes for concern for investors, this sell-off could present a buying opportunity for those with the long-term focus in mind, and it will be curious to see what the hedge funds themselves do.

There are some things money can't buy, but MasterCard isn't one
The final company hedge funds were buying up is none other than MasterCard, and frankly, from an investment perspective, it made a ton of tense.

Source: Flickr / Chris Lim.

Through the first nine months of the year, MasterCard saw its stock price fall by roughly 12%, a far cry from the 6.5% return delivered by the market.

While there were some concerns about new sanctions in Russia, very little about its future business prospects had changed, and the fact that it lagged the market simply didn't make sense.

Throughout the third quarter, MasterCard's valuation dropped, and all signs pointed to it being an attractive investment.

It should come as no surprise that when MasterCard recently announced a terrific third quarter, its stock popped by nearly 10%, which will undoubtedly put smiles on the faces of the hedge funds who unashamedly continued to buy more of the stock.

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Stocks Mentioned

Mastercard Incorporated Stock Quote
Mastercard Incorporated
MA
$318.24 (0.88%) $2.76
eBay Inc. Stock Quote
eBay Inc.
EBAY
$42.89 (2.93%) $1.22
Pioneer Natural Resources Company Stock Quote
Pioneer Natural Resources Company
PXD
$223.94 (0.39%) $0.86
Allergan plc Stock Quote
Allergan plc
AGN
AbbVie Inc. Stock Quote
AbbVie Inc.
ABBV
$153.80 (0.42%) $0.64

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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