Daniel S. Och‘s publicly-traded $61 billion hedge fund firm, Och-Ziff Capital Management, has been in choppy waters since last year’s summer and even trampled on investors’ dividend hopes for the first quarter this year. Och, however, remains unnerved about the market volatility claiming that it actually plays to their strengths. As the fund gears towards a recovery, we believe that retail investors could find worthwhile investment ideas among its top equity holdings according to OZ’s recent 13F filing. So, without further ado let us dig deeper into these stock picks.
We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).
#4 Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA)
– Shares Owned by OZ Management (as of March 31): 8.05 Million
– Value of Holding (as of March 31): $430.67 Million
First off, OZ significantly hiked its stake in Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) by 154% in the first three months of this year. The stock price has been trending down posting year-to-date losses of 18%, even though the company beat top and bottom line estimates in its first quarter financial results by delivering an EPS of $1.2 on $4.81 billion in revenue. Analysts were expecting earnings of $1.17 per share on revenue of $4.8 billion. During the March quarter the Israel-based company finalized acquisition of Rimsa and completed the business venture in Japan with Takeda. It is also looking forward to closing the $40.5 billion acquisition of Allergan’s generic medicines portfolio, which is only weeks away from completion. Andreas Halvorsen‘s Viking Global believes that the company is undervalued and boosted its Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) holding by 32% during the first quarter to 32.97 million shares.
#3 Humana Inc (NYSE:HUM)
– Shares Owned by OZ Management (as of March 31): 2.38 Million
– Value of Holding (as of March 31): $435.90 Million
While OZ hiked its stake in Humana Inc (NYSE:HUM) by 65% during the January-March period, Larry Robbins‘ Glenview Capital, another prominent hedge fund, reduced its holding in the company by 23% to 6.42 million shares. The Louisville-based insurer might be exiting some products or markets owing to a decline in individual membership. During the first quarter the number of members in such plans dropped by 21% to 875,700. So far this year, Humana Inc (NYSE:HUM)’s stock price has inched up by more than 5% as investors are looking forward to its merger with Aetna.
#2 Starwood Hotels & Resorts Worldwide Inc (NYSE:HOT)
– Shares Owned by OZ Management (as of March 31): 5.58 Million
– Value of Holding (as of March 31): $465.25 Million
Next in line is the $12.33 billion, hotel and leisure company Starwood Hotels & Resorts Worldwide Inc (NYSE:HOT), in which OZ Management initiated a stake during the first quarter of 2015 and boosted the holding by 56% in the last quarter ending in March. The bet amasses about 3.23% of Starwood Hotels & Resorts Worldwide Inc (NYSE:HOT)’s outstanding shares. Even though the Hotels, Motels & Cruise Lines industry is down by an average of around 11% on a year-to-date basis, Starwood’s stock price is up by 8% during the same period. The company posted first quarter earnings of $0.7 per share on revenue of $1.4 billion, beating EPS estimates by $0.12 and revenue estimates by $60 million. Boykin Curry‘s Eagle Capital Management increased its Starwood Hotels & Resorts Worldwide Inc (NYSE:HOT) holding by 60% during the March quarter to 6.54 million shares.
#1 Alphabet Inc (NASDAQ:GOOG)
– Shares Owned by OZ Management (as of March 31): 690,143
– Value of Holding (as of March 31): $514.12 Million
After a 17% hike, OZ Management’s Alphabet Inc (NASDAQ:GOOG) class C holding represented 2.6% of its portfolio. OZ also has ‘Call’ options equal to 619,300 shares of Alphabet with the total value of the position being $461.35 million. The tech giant showcased a range of products including messaging apps, Google Assistant, which is a conversational assistant service that competes directly with Apple’s Siri and Amazon’s Alexa, and Google Home, a small voice assistant competing with Amazon’s Echo line at this year’s Google I/O conference. Financially, Google has lately been feeling the effects of lower ad prices owing to YouTube ad growth and lower smartphone search ad prices. Viking Global increased its stake in Alphabet Inc (NASDAQ:GOOGL)’s class A stock by 11% during the first quarter to 2.05 million shares.