$21 Billion Farallon Capital’s Most Promising Stock Picks

Page 1 of 2

Hedge funds get much of their alpha from small cap stocks, which makes sense as these names tend to be less widely followed and so for a given amount of in-depth research it is easier to spot an undervalued company. Investing in the most popular small-cap stock picks among hedge funds has generated an alpha of about 120 basis points per month according to our own analysis (read more about our hedge fund small cap strategy). Retail investors generally aren’t as familiar with these companies either and so the input from notable investors may be particularly welcome, though as with any investment screen type of strategy it’s important to take at least a brief look at each company before deciding whether or not it is worth further research. We have gone through the most recent 13F filing from Farallon Capital (see the full list of stocks the fund reported owning) and here are five of its largest holdings with market capitalizations between $250 million and $2 billion:

Farallon owned over 12 million shares of Hudson Pacific Properties Inc (NYSE:HPP), which is a real estate investment trust owning office and entertainment related property in California. The stock’s dividend yield of 2.4% is not particularly attractive from an income perspective, which is where much of the interest in REITs comes from. However, perceived improvements in the real estate market- including commercial real estate- have caused the stock to rise 44% since a year ago.

FARALLON CAPITALTown Sports International Holdings, Inc. (NASDAQ:CLUB), another of the fund’s small cap picks, has about $1 million in daily dollar volume. The fitness club operator is based in the Northeast under names such as New York Sports Club, Boston Sports Club, and Washington Sports Club. Value investor Joel Greenblatt had a small position in the stock. The stock carries trailing and forward P/E multiples of 16 and 13, respectively; while earnings were up strongly in its most recent quarterly report compared to the same period in the previous year, revenue growth was much more modest.

The fund also liked scientific and electronics instrument company FEI Company (NASDAQ:FEIC), reporting a position of about 600,000 shares. FEI’s earnings were up 11% in the third quarter of 2012 versus a year earlier, but the market appears to be expecting stronger growth than that as the stock trades at 21 times trailing earnings. A number of traders seem to think the company is overvalued, with 10% of the outstanding shares held short. Fisher Asset Management, managed by billionaire Ken Fisher, owned 1.2 million shares at the end of September (check out Fisher’s stock picks).

Billionaire Ken Griffin also likes a Farallon energy stock:

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

The 10 Longest Wars of All Time

The 13 Worst Looking Foods that Taste Great

The 6 Most Gruesome Injuries Suffered During a Sports Match

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!