5 Bullish Picks by Billionaire D. E. Shaw’s Hedge Fund: General Electric Company (GE), Philip Morris International Inc. (PM), Occidental Petroleum Corporation (OXY)

Page 1 of 2

David ShawDavid Elliot Shaw (D. E. Shaw) founded his hedge fund firm, D. E. Shaw & Co., in 1988. His $28-billion firm primarily relies on quantitative methods to benefit from security pricing anomalies, but lately has expanded its use of qualitative methods to pick winning stocks. This quant-based firm’s flagship macro fund, the $9-billion Oculus Fund, returned 18% last year. Another of its funds, the Composite International, gained 15.6%. While many of D. E. Shaw & Co.’s positions are held for short-term periods, a large number of its holdings are long-term picks. In its recently released 13F disclosure for the fourth quarter of 2012, D. E. Shaw & Co. presented several fairly bullish positions. Here is a closer look at the firm’s bullish picks paying dividends in excess of 2.0%. All these picks are generally fairly priced.

Occidental Petroleum Corporation (NYSE:OXY) was one of D. E. Shaw & Co.’s bullish plays last quarter. During the quarter, the hedge fund hiked its OXY share holdings by 86% to 3.9 million shares or nearly $300 million. OXY is one of the largest oil and gas companies in the United States. It has a dividend yield of 3.1%, payout ratio of 35%, and five-year annualized dividend growth of 17.7%. The company has raised dividends for 11 consecutive years. As a result, it has been selected for inclusion in Mergent’s Dividend Achievers indices for 2013. Occidental Petroleum Corporation (NYSE:OXY) has been a laggard among its peers in stock returns over the past year, posting a 16.2% decline. This underperformance comes despite the company’s output growth of 5% in 2012 to a new record. The company sees a 5%-to-8% base annual production growth over the long term and expects to cut U.S. drilling costs by 15% in 2013. This should help boost its EPS in 2013 and beyond, but analysts forecast only modest EPS growth of 4.5% annually this year and next. A catalyst for the firm’s future growth will be the crude oil pipeline called BridgeTex Pipeline, which will stretch from Colorado City, Texas to the Houston Gulf Coast. The pipeline will come into service in 2014. In terms of valuation, Occidental Petroleum Corporation (NYSE:OXY) is trading at 11.2x forward earnings, about on par with its larger peer Exxon Mobil (XOM).

Philip Morris International Inc. (NYSE:PM), the marketer of popular cigarette brands such as Marlboro and L&M outside the United States, was another bullish play by D. E. Shaw’s hedge fund. Last quarter, the hedge fund raised its PM stock holdings by 48% to nearly 3 million shares or $248 million. Philip Morris International Inc. (NYSE:PM) has a dividend yield of 3.7% and a payout ratio of 59%. Its dividend has increased nearly 85% cumulatively since mid-2008. The company boasts strong organic growth, good brand performance, and strong pricing power, despite regulatory and litigation risks. It is expected to post the highest rate in long-term EPS growth among its peers, averaging 11.6% annually for the next five years. The company offers a good combination of dividend growth and yield at reasonable valuation. As cited by Barron’s, based on Philip Morris International Inc. (NYSE:PM)’s attractive fundamentals with broad geographical diversification, including the large emerging market exposure, the stock was recently included in Morgan Stanley’s “20 for 2016,” the list of favorite high-quality stock to own for the next three years. The stock’s currently valuation of 15.7x forward earnings, slightly higher than the industry multiple of 15.0x, is justified by a rate of EPS growth that is faster than growth rates of its peers.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
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

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

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!