5 New Positions From Farallon Capital Management: Netflix, Inc. (NFLX) and More

Andrew J. M. Spokes became the sole managing partner of Farallon Capital Management at the end of last year, when Thomas Steyer stepped down after twenty-seven years at the firm. Despite his retirement, the hedge fund founder left a large bulk of his capital under Spoke’s management. Farallon filed its 13F with the SEC this month, indicating which positions the firm took in Q4 of 2012. Although there is a lag between actual entry times and the distribution of 13Fs, one can still get an idea of Farallon’s market position by analyzing the document. We have sifted through many billionaire hedge fund managers’ filings to come up with a market-beating basket of small-caps (learn more here). Here is our take on Farallon’s new positions as indicated by the filing:

Dollar General Corp. (NYSE:DG) made a big splash into Farallon’s portfolio as a top position with a $190 million investment. DG has seen margins increase substantially since 2008, when the recession took hold and unemployment rose. Stagnant wages have kept a number of shoppers turning to the discount category (which includes other retailers like Family Dollar Stores, Inc. (NYSE:FDO) and Dollar Tree, Inc. (NASDAQ:DLTR)). If the economy improves, these low-cost stores will likely experience a flight of customers. Analysts still remain largely bullish on DG, with fifteen out of twenty-three estimates recommending a buy. Billionaire David Harding owns over 110,000 shares.

EMC Corporation (NYSE:EMC) takes up 3% of Farallon’s $4.3 billion in assets and was the second largest addition to the fund’s portfolio. The IT infrastructure player and 80% owner of VMware, Inc. (NYSE:VMW) recently posted fourth-quarter earnings last month, issuing a beat and showing increases in revenue, product sales, and services versus the same quarter a year prior. The company also expects a share repurchase amounting to $1 billion for 2013. Wall Street has high hopes for this stock, coming together to create a one year price target that is 26% higher than current levels. David Costen Haley of HBK Investments has a debt investment in EMC worth nearly $400 million.

The Walt Disney Company (NYSE:DIS) was another large addition with over $110 million committed by Farallon’s investment team. In December, Disney announced a deal with Netflix, Inc. (NASDAQ:NFLX) that would enable only Netflix subscribers to view Disney content (i.e. Marvel, Pixar, Walt Disney (NYSE:DIS) Animation) from 2016 onward. The agreement would also give Netflix Pay-TV rights over new Dreamworks releases, starting in 2013. DIS recently posted Q1 fiscal 2013 earnings at the start of the month that beat analyst expectations slightly and revealed total revenue growth of 5% year over year. Billionaire Ken Fisher holds more than 8 million shares of the company.