Following a dismal 8.2% loss posted by its flagship fund Viking Global Equities in the first quarter, Connecticut-based prominent hedge fund Viking Global made a number of changes to its US equity portfolio during the April-June period, its latest 13F filing reveals. Since its inception in 1999, Viking Global and its founder billionaire Andreas Halvorsen have made a name for themselves by delivering superior risk-adjusted returns on a consistent basis. However, like most other large hedge funds, the performance of Viking has also taken a hit in the last few quarters.
According to the fund’s latest 13F filing, its long US equity portfolio at the end of June was worth $23.54 billion, with around 30% of it invested in tech stocks. Though stocks from the utilities and energy sector accounted for only 4.7% and 15% respectively of Viking Global’s equity portfolio value at the end of June, those were the sectors in which the fund made some of its biggest purchases during the second quarter. Taking that into account, in this post, we will take a look at the five major purchases made by Viking Global in these two sectors and will try to figure out why the fund has become bullish on the stocks in question.
At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details).
#5 Dynegy Inc. (NYSE:DYN)
– Shares Owned by Viking Global (as of June 30): 9.13 Million
– Value of Holding (as of June 30): 157.49 Million
Let’s start with Dynegy Inc. (NYSE:DYN) in which Viking Global increased its stake by a whopping 2297% during the second quarter. Dynegy Inc. (NYSE:DYN)’s stock appreciated by over 200% in the period between late-February and early-June. However, it has given up a large chunk of those gains in the past three months and is currently trading up only 2% year-to-date. On August 3, the company reported its second-quarter earnings, declaring a per share loss of $6.73, which was more than ten times the per share loss of $0.64 that analysts had expected. The revenue of $904 million that Dynegy reported for that period was also $126 million less than analysts’ consensus estimate. Despite such weak numbers, most analysts who cover the stock continue to remain bullish on it including analysts at Deutsche Bank AG, who reiterated their ‘Buy’ rating and $35 price on August 25. During the second quarter, the number of funds covered by Insider Monkey long Dynegy increased by two to 43 and the aggregate value of their holdings in the company increased by $313 million to over $1 billion. Among them, Clint Carlson‘s Carlson Capital reduced its stake in the company by 34% to 5.48 million shares.