Billionaire Julian Robertson is one of the most closely followed figures in finance, even after his official retirement from running Tiger Management several years ago. Robertson, who is notable in part because several “Tiger Cubs” who worked for him have gone on to become successful fund managers themselves, still files quarterly 13Fs with the SEC. We track his 13Fs alongside those of hundreds of other investors as part of our work researching investment strategies; we’ve found that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year (learn more about our small cap strategy) and our own portfolio based on this finding outperformed the S&P 500 by 33 percentage points in the last 11 months. It’s also interesting to use 13Fs to see what top managers have been doing recently. We went through Robertson’s 13F for the end of June and here are three things we noticed compared to the billionaire’s previous filing:
Satellites. Two of Robertson’s three largest holdings by market value at the end of the quarter were satellite radio company Sirius XM Radio Inc (NASDAQ:SIRI) and satellite imagery provider DigitalGlobe Inc (NYSE:DGI). (His top pick, Valeant Pharmaceuticals Intl Inc (NYSE:VRX), had seen little change in position size compared to three months ago.) Sirius XM Radio Inc (NASDAQ:SIRI) is a fairly expensive stock, with trailing and forward earnings multiples of 50 and 32 respectively, so investors are depending on very high growth from the company. Good subscriber numbers led total revenue up 12% last quarter compared to the second quarter of 2012. Even with somewhat higher costs to acquire these subscribers and pay out royalties, pretax income grew by nearly 50% though EPS was only 2 cents for the quarter. Billionaire Leon Cooperman’s Omega Advisors had owned a large stake in Sirius XM Radio Inc (NASDAQ:SIRI) at the end of Q1 (find Cooperman’s stock picks).
DigitalGlobe Inc (NYSE:DGI) also leans towards being a more speculative name. The company was unprofitable in each of the first two quarters of 2013, and is expected to lose $1.13 per share in total for the year. Wall Street analysts predict that the company will recover next year, but even so the forward P/E is rather high at more than 60. DigitalGlobe Inc (NYSE:DGI) is not having a problem growing its business, as shown by large increases in sales, it is that higher COGS and SGA expenses are resulting in operating losses even so.
Howard Hughes. The billionaire initiated a position of about 200,000 shares in $4.2 billion market cap real estate developer Howard Hughes Corp (NYSE:HHC). The company’s Master Planned Community business, which accounts for a slight majority of revenue, grew its sales by 27% in the second quarter of 2013 versus a year earlier and segment margins increased as well. Robertson is likely buying the stock on his belief in an improving real estate market, for residential real estate in particular. Pershing Square, managed by billionaire Bill Ackman, had owned 3.6 million shares of Howard Hughes Corp (NYSE:HHC) at the beginning of April (see Ackman’s stock picks).