Apple Inc (AAPL) Is Among This Hedge Fund’s Top Stock Picks

Driehaus Capital Management was founded by Richard Driehaus in 1982 and has since become a widely followed investment manager. Every quarter, the fund files a 13F with the SEC and in this document discloses many of its long equity positions; we like to use 13Fs from notable investors to serve as initial sources of tickers that we can do basic analysis of and decide whether or not they’re worth looking at further. Read on for our quick take on five of the largest positions that Driehaus disclosed and compare them to previous filings.

Richard Driehaus

Apple Inc. (NASDAQ:AAPL) was actually Driehaus’s largest position by market value at the end of the third quarter, with the fund reporting ownership of about 80,000 shares (down slightly from what it had owned three months earlier). Apple’s recent correction- which has been attributed to everything from low product sales to investors locking in their capital gains in the high-flying stock at current tax rates- has left it trading at only 12 times trailing earnings even though it is a dominant, growing global company. Billionaire David Shaw’s D. E. Shaw had over $1 billion invested in Apple stock at the end of June (find more of billionaire David Shaw’s favorite stocks). We think that the pullback has created a buying opportunity here.

The fund also liked Baidu.com, Inc. (NASDAQ:BIDU), with about 280,000 shares in its portfolio according to the 13F. The company reported very good numbers in the third quarter, with revenue and earnings both up in the 50% range from a year earlier. Of course Baidu, as a Chinese company, faces skepticism from investors as far as the accuracy of these numbers and its ability to continue to prosper in the event of slower Chinese growth. At 23 times trailing earnings, if the company’s growth truly is sustainable then it could provide growth at a reasonable price.

Driehaus liked Brazil as well as China, with Petroleo Brasileiro Petrobras SA (NYSE:PBR.A) being another of its top picks. The fund owned 1.1 million shares of the integrated oil and gas company which is notable for its position in drilling in offshore Brazil. We’d rather own an oil and gas company which has more diversification, but in the past Brazil has been an appealing growth market and the stock currently trades at only 9 times consensus earnings for 2013 (though this represents strong earnings growth over the next year, with the trailing P/E being 14). Sandy Nairn’s Edinburgh Partners had a large position at the end of the second quarter.

Mellanox Technologies, Ltd. (NASDAQ:MLNX), a $3.6 billion market cap semiconductor provider focused on data transmission functions, was another of Driehaus’s top picks. It is a growth play: while its trailing P/E is 37, its revenues in the third quarter were more than double what it had taken in a year earlier and this caused a monster increase in earnings. The sell-side’s projections imply a forward P/E of 20 and a five-year PEG ratio of 0.3, suggesting that analysts are even more bullish on the company than the market. Investors should note that 13% of the shares outstanding were held short as of the most recent data, but Mellanox might be worth investigating further.

Another of the fund’s top picks was DSW Inc. (NYSE:DSW), a retailer which sells footwear and accessories in the U.S. Its most recent quarter showed a steep fall in earnings compared to the same period in the previous year despite slightly higher sales. It’s another common short target, with 12% of the float held short. At a market capitalization of $2.7 billion it trades at 20 times trailing earnings; therefore, it will need to rebound as a company, and show that it has sustainable growth from that point, in order to prove a good value. We think that we’d avoid it.

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 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

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

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!