Billionaire Jeffrey Vinik’s Latest Stock Picks

VINIK ASSET MANAGEMENTJeffrey Vinik became famous as an investor during his days in the early to mid 1990s when he ran Fidelity’s Magellan mutual fund. He then left Fidelity and founded Vinik Asset Management, which today primarily manages money for family and friends. Vinik files a 13F with the SEC about seven weeks after the end of each quarter, giving the general public the chance to see what the fund has been buying and selling (at least in terms of long equities). Here are some investment themes that we noticed when going through the 13F and comparing it to previous filings.

Which gold miner? Vinik was very active in the gold mining industry. While the fund sold a considerable number of its shares in Barrick Gold Corporation (NYSE:ABX) and sold over 80% of its shares in Goldcorp Inc. (NYSE:GG), it initiated a position of 14.5 million shares in NovaGold Resources Inc. (NYSE:NG). Barrick, which was still Vinik’s largest stock holding reported on the 13F, and Goldcorp are giants in the industry with market capitalizations above $30 billion (Novagold has a much smaller market cap, of $1.2 billion). All three stocks are down in the last year, but Novagold has fallen the furthest as Wall Street analysts expect the company to be unprofitable both this year and next year. It’s possible that, being a distressed business, its stock price has the most to gain from a recovery in gold prices, but we’re not sure we’d want to be so dependent on gold going higher. The other two gold miners differ a bit: Barrick is much cheaper in terms of its P/E multiples at 10 times trailing earnings and 7 times forward earnings estimates (compared to 21 and 12, respectively, for Goldcorp). However, Barrick’s earnings were down 55% in the third quarter of 2012from its levels in Q3 2011, so its low multiples make some amount of sense. We think that gold watchers should be considering the miners as well as more direct ways to invest in gold.

Best Buy. Best Buy Co., Inc. (NYSE:BBY) has been suffering as Amazon and other retailers poach much of its electronics retail business, but the stock price has been bumping around recently as co-founder Richard Schulze moves towards a potential takeover of the company. It’s not clear that he’d actually be able to execute- Schulze would need substantial private equity and debt capital to make the buyout work, and while the current EV/EBITDA multiple is a very low 2.3x we think that lenders might balk. The stock is down 44% in the last year and trades at only four times forward earnings estimates as the market is highly skeptical of the sell-side’s optimism. Read our analysis of Best Buy as a public company. Vinik liked the stock during the third quarter, closing September with 5.2 million shares in its portfolio, but we’d avoid the stock- long and short positions would both carry too much risk.

Selling Home Depot. Vinik cut its stake in The Home Depot, Inc. (NYSE:HD) from 1.7 million shares at the beginning of July to about 300,000 shares by the end of the quarter. Home Depot’s stock has been up as investors look to increased housing and construction to drive demand, but in the third quarter earnings were only up 1% from a year earlier. Adage Capital Management, which is managed by Phil Gross and Robert Atchinson, had been a major holder of the stock during the second quarter. At 22 times trailing earnings, we don’t think that Home Depot is a good buy.

Our impression is that Vinik made a good call by selling Home Depot- the pricing seems a bit high right now. Best Buy is a different story: it’s possible that the potential for a buyout is keeping the price up and if that transaction doesn’t happen shareholders could see a correction. We don’t have a particularly strong opinion on the gold miners, though it looks to us like Vinik is depending quite a bit on higher gold prices by taking such a large position in Novagold.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

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!