Stocks bought by Hedge Funds this week

What happened?

Michael Burry (via his Hedge Fund Scion Asset Management) increased his stake in Stellantis ($STLA), the 8th largest automaker, adding 75,000 shares to the existing 325,000.

Despite a major UAW strike, the company's stock rose 16% since Q2, suggesting Burry's optimism in its further growth. This position is now Scion's largest, valued at about $8.1 million

Stellantis shares have performed exceptionally well over the past year, with profitability exceeding that of peers like BMW and Mercedes-Benz Group. Sustainability of margins is a significant question, but factors such as synergies, geographic mix, and agile management support a positive outlook.

Stellantis aims for double-digit adjusted operating income margins, with projections extending to 2030.

Synergies between former Fiat Chrysler (FCA) and PSA Group brands are seen as underestimated, with potential beyond cost savings.

Stellantis leads in the electric vehicle (EV) market, breaking price barriers with models like the Citroen ë-C3, positioning itself against Chinese competition and ahead of Tesla in key markets.

Stellantis makes strategic moves in China, investing in Chinese EV startup Leapmotor, showcasing confidence in its own BEV platform.

Despite industry challenges, Stellantis seems undervalued according to various analysts estimates, supported by long-term stakeholders and experienced leadership.

Adaptation to the EV market demonstrates Stellantis' ability to navigate industry shifts, albeit with potential controversies such as CEO remuneration and job cuts in the sector.

What happened?

Bill Ackman’s Hedge Fund Pershing Square just added 10% to its position in Hilton Worldwide

He now holds $1.6 billions worth of shares in the hospitality company, and this position represents the 14.75% of his portfolio

Hilton's asset-light business model, reliant on intellectual property licensing, yields high-margin cash flows, with 87% of properties operating under franchise agreements.

Notably, Hilton's EBITDA margin stood at a remarkable 69.3% in 2023, demonstrating its resilience and profitability.

Hilton's 2023 performance saw a 12.1% rise in Revenue per Available Room (RevPAR), driven by increased demand and rising prices, despite industry-wide occupancy levels remaining slightly below normal.

While some investors expressed concern about net unit growth falling short of targets in Q3, management projects a significant uptick, especially post-2024, with new concepts and international expansion plans.

Wall Street analysts maintain a Buy consensus on HLT stock, with an average price target implying a +10.3% upside potential.

Overall, Hilton's strong financial performance, innovative business model, and promising outlook make it a compelling investment choice, aligning with Ackman's bullish stance and potentially suitable for inclusion in investment portfolios.

What happened?

Warren Buffett-led Berkshire Hathaway, has acquired 5.2 million shares of Occidental Petroleum Corp (OXY.N), bringing its stake in the oil company closer to 28%.

His position is worth $14.5 billions and represents ~5% of its portfolio

Warren Buffett's significant investment in Occidental Petroleum (OXY) highlights its attractiveness despite economic challenges.

Occidental benefits from its substantial exposure to US shale, particularly in the Permian Basin, making it a major player in a booming industry.

The company stands to gain from high oil prices, as it focuses on profitability and cash flow rather than sheer production growth.

With its vast onshore acreage and efficient operations, Occidental has room for further growth and cost reduction.

Strong management prioritizes cash flow, debt reduction, dividends, and share buybacks, ensuring investor returns.

Occidental's healthy cash flow and potential for significant free cash flow yield make it an appealing investment option. Valuation suggests a solid margin of safety, especially with the expectation of sustained higher oil prices.

Investors can seize the opportunity by directly investing in Occidental or diversifying through ETFs like IEO or IXC for exposure to the energy sector.

Analysts recommendations is Moderate Buy, with an average price target of $67 (implying a >20% growth potential)