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 Click to see monthly returns in table format!

Lists

5 Best States for Golf Adventures

Top 15 Places To Visit Before You Die

10 Most Expensive Smartphones in the World

10 States with Lowest Physician Density

10 Top Reasons For Getting Fired

The 3 Best States to Start an LLC

10 Jobs That Allow You to Travel

7 High-Paying Jobs You Can Do From Home

12 Best Cities to Shop in USA

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

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!