Viking Global, a hedge fund managed by billionaire and Tiger Cub Andreas Halvorsen, filed its 13F for the first quarter of 2013 with the SEC in May. These filings disclose many of a hedge fund’s long equity positions in U.S. stocks as of the end of the most recent fiscal quarter; despite the age of this information, we’ve actually found that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year. We also like to screen individual funds’ filings according to various criteria, including low price-to-earnings multiples, in order to provide initial investment ideas which investors can research further if they see an interesting stock. Here are our brief thoughts on the five largest positions in Viking Global’s portfolio as of the end of March with both trailing and forward P/Es of 13 or lower (or see the full list of Halvorsen’s stock picks).
The fund increased its holdings of LyondellBasell Industries NV (NYSE:LYB) by 74% to a total of more than 13 million shares. The chemicals company experienced a 9% decline in revenue in its most recent quarter compared to the same period in the previous year, and while net income was up we would expect that high growth based on margin improvements alone is not sustainable. Lyondellbasell pays a dividend yield of 3% at current prices, in addition to fairly low P/Es, but we’d note that it is highly exposed to macro activity with a beta of 2.5.
Halvorsen and his team had close to 11 million shares of Capital One Financial Corp. (NYSE:COF) in their portfolio at the beginning of April. The stock not only looks like a value play in quantitative terms given its trailing earnings multiple of 12, but also if we consider that it trades at a discount to the book value of its equity- the P/B ratio is 0.9. Earnings have been down recently, however. Fellow billionaire- and fellow Tiger Cub- Stephen Mandel’s Lone Pine Capital reported a position of 5.1 million shares in its own 13F (find Mandel’s favorite stocks).
The oil and gas refining and marketing industry has been a popular source of value opportunities for many funds. Viking Global bought 6.7 million shares of Valero Energy Corporation (NYSE:VLO) between January and March. Both the trailing and forward earnings multiples come in at 7, and with Wall Street analysts expecting earnings per share to grow over the next several years the stock’s five-year PEG ratio is 0.8. However, sales were down modestly in the first quarter of 2013 versus a year earlier and of course there are a number of cheap industry peers.