Bain Capital’s Hedge Fund Likes Dollar General and More

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Bain Capital is best known as a private equity fund engaging in leveraged buyouts, but its success has allowed it to develop other investment funds including long/short equities fund Brookside Capital. Brookside filed its quarterly 13F in the middle of February; we like to analyze 13Fs both in pursuit of investment strategies (for example, we have found that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year) and to see which stocks individual hedge funds like. Read on for our quick take on the five largest holdings by market value in Brookside’s portfolio as of the end of December or see the full list of stocks the fund reported owning.

Brookside’s largest position was its 4.9 million shares of Express Scripts Holding Company (NASDAQ:ESRX), representing a large increase in shares from three months earlier. 73 other funds and other investors in our database of 13F filings owned Express Scripts, making the pharmacy benefit services company one of the most popular healthcare stocks among hedge funds (find more healthcare stocks hedge funds love). Express Scripts trades at 12 times forward earnings estimates, as it is expected to continue to recover from its conflict with Walgreen Company (NYSE:WAG); current growth rates are temporarily very high as a result of that factor.

Earnings Analysis: Dollar General Corp. (NYSE:DG)Dollar General Corp. (NYSE:DG) was another of Brookside’s top picks, as the fund’s stake increased by 225 to a total of 5.3 million shares. The dollar store’s beta is only 0.1, signifying even less sensitivity to the broader economy than discount retailer such as Wal-Mart Stores, Inc. (NYSE:WMT). Dollar General’s trailing earnings multiple is 17, which is not that wide a premium over Walmart’s trailing P/E of 14, and revenue and earnings growth have been quite good at the dollar store. Billionaire Stephen Mandel’s Lone Pine Capital was also buying Dollar General last quarter (check out Mandel’s stock picks).

Here are three more stocks Brookside owned:

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