2 FTSE 100 stocks that hedge funds have been buying

THE FTSE100 hasn’t had a reputation for exceptional returns recently. But recent 13F filings indicate that high-powered hedge funds are opportunities in the UK.

In itself, this is not a reason to buy (or sell) a stock. But examining the effects of smart money can be a source of ideas that might be worth examining more closely.

Ashtead

Dodge & Cox is a value investing operation. And during the third quarter, the company bought about 2.3 million shares of an industrial equipment rental company. Ashtead (LSE:AHT).

So far, this move has gone very well: the stock is up 7.5% since the end of September. The main reason for this is the result of the US elections.

More than 85% of the company’s revenues come from across the Atlantic. This type of geographic concentration can be a risk, but strong industrial activity in the US could provide a big boost to the FTSE 100 company.

The demand for industrial equipment is very cyclical. And that means I think price-to-earnings (P/E) is a better metric to use than price-to-earnings (P/E) when it comes to valuing Ashtead stock.

Ashtead P/B ratio from November 2023 to November 24

Created on TradingView

On this basis, the stock reached its lowest levels of the year between June and August. So even without predicting the election outcome, it might have seemed like a good time to buy.

The recent rally saw the multiple move back towards the top of its 12-month range. This is 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 the third quarter. The firm has invested in over 200 companies, but there’s a reason I think it’s interesting.

The stock is currently down 4.5% from the end of the third quarter. This is mainly due to a court decision against Close brothers in the case of commissions on automobile loans.

Lloyds has significant exposure to this area, but this is nothing new. What has changed recently is that the risk of significant liabilities has increased following the decision against Close Brothers.

Unfortunately, investors won’t know until February whether Maverick has done anything in response to this situation. This is the limit of 13F filings: they are only updated quarterly.

This is another reason not to just follow hedge funds into stocks. But I don’t think that makes information about what hedge funds buy completely worthless.

The fact that the company decided to buy Lloyds, rather than – for example – Barclays is interesting to me. At least it gives me a 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 is buying. But I think there are many powerful investors worth paying attention to.

A number of them have recently seen opportunities in FTSE 100 stocks. And while that in itself isn’t enough of a reason to buy a stock, I don’t mind taking a closer look.