Ken Griffin of Citadel Investment Group holds one of the most diverified equity portfolios among billionaire investors that we track. Citadel’s most recent 13F, disclosed an equity portfolio valued at $82.66 billion, where the largest long position amasses only 0.70% of the value, while all top 10 picks represent less than 8% of the total portfolio. The portfolio is also diversified across sectors and comprises companies from Technology, Consumer Discretionary, Finance, Energy, Healthcare, Industrials, and others. Such a diversification lies within Mr. Griffin’s strategy, which involves complex financial algorithms and a lot of computer codes. This innovative technical approach worked out well for Mr. Griffin, with Citadel reporting solid performance in most years since its inception and despite a significant slump during the financial crisis, the investor managed to recover from the losses.
A large diversification allows Mr. Griffin to invest in a vast range of companies from small to large in terms of market capitalization. This strategy can be very effective, especially if we take into account the returns of Citadel’s two funds, Kensington and Wellington, which gained 25% and 19.4% in 2012 and 2013 respectively. Moreover, such a strategy is also supported by our research of most popular stock picks among investors. The majority of companies in which big money managers prefer to invest their money are represented by large-cap stocks, however, 50 most popular stocks underperformed the market by 7 basis points per month between 1999 and 2012. Therefore, equity hedge funds had small returns of 4.8%, 11.1% and 1.4% between 2012 and 2014, which are very insignificant relative to the S&P 500 ETF’s gains of 16%, 32.3% and 13.5% during the same years. On the other hand, small cap picks performed much better and our strategy that identifies the best small-cap picks advanced by 33.3% in 2012, 53.2% in 2013 and 28.2% in 2014.
However, let’s get back to Citadel Investment Group. One of the sectors in which Mr. Griffin slightly upped his exposure during the fourth quarter is energy. It’s easy to understand why. Amid low oil prices and issues with supply and demand, the stocks of oil companies took a hit in the second half of 2014. However, oil is a cyclical commodity, which means that the prices are most likely to rebound. Moreover, most large oil companies implemented strategies to hedge from the decline of oil prices and have been able to generate profit growth amid falling revenues. Three oil companies that represented Mr. Griffin’s largest equity plays at the end of 2014 are Devon Energy Corp (NYSE:DVN), Anadarko Petroleum Corporation (NYSE:APC), and Exxon Mobil Corporation (NYSE:XOM) and the investor upped his positions in all three stocks during the last three months of 2014.
In Devon Energy Corp (NYSE:DVN), Citadel disclosed a $529 million position that contains 8.64 million shares, up by 78% on the quarter. Devon’s stock lost around 12% in the last 52 weeks, performing slightly better than the overall oil & gas exploration and production industry which fell by 15%. Nevertheless, Devon reported a revenue growth to nearly $6.0 billion for the fourth quarter of 2014, from $2.61 billion a year earlier and a net loss of $1.01 per share, versus a profit of $0.51 per share for the fourth quarter of 2013. Analysts expected earnings of $1.05 per share on revenue of $4.11 billion for the fourth quarter. Additionally, Devon Energy Corp (NYSE:DVN) plans to reduce its exploration and production budget in 2015 by 20% on the year, although production is still expected to grow by up to 25%. Despite weak earnings, the majority of the top shareholders of Devon Energy Corp (NYSE:DVN) among the funds that we track raised their stakes in the company during the last three months of 2014. For example, billionaire Israel Englander’s Millennium Management upped its stake by 50% to 3.89 million shares.
The stock of Anadarko Petroleum Corporation (NYSE:APC) had a slightly better performance in the last year, as it lost only 7%. Mr. Griffin increased his stake in the company by 35% during the October-December period to 4.92 million shares, valued at $406.15 million. For the fourth quarter of 2014, Anadarko posted revenues of $3.18 billion, down by 5% on the year and net loss of $0.78 per share, versus a loss of $1.53 per share a year earlier. However, what’s also important is the fact that Anadarko Petroleum Corporation (NYSE:APC) has been divesting its interest in ventures and sold its China subsidiary for $1.08 billion last year. Moreover, the company faces some legal claims, which have already costed the company over $5 billion in January alone. Nevertheless, Anadarko remains to be the most favorite energy stock among billionaire fund managers with 11 billionaires reporting long positions with an aggregate value of $1.63 billion. Aside from Mr. Griffin, Paul Singer of Elliott Management is also bullish on Anadarko Petroleum Corporation (NYSE:APC) as Elliott upped its stake by 24% on the quarter to 4.62 million shares held as of the end of last year.
Finally there is Exxon Mobil Corporation (NYSE:XOM), in which Mr. Griffin raised his stake by 150% on the quarter to 2.82 million shares worth $260.55 million. Exxon is the largest integrated Oil & Gas producer with a market cap of $350 million. The stock recently hit a 52-week low of $84.00 per share and currently trades slightly above this value. Aside from usual factors, the decline of Exxon’s stock is also impacted by analysts, who in their majority either downgraded the stock or lowered their price targets in the last couple of months. Nevertheless, Goldman Sachs have recently reinitated coverage of Exxon Mobil Corporation (NYSE:XOM) and set a ‘Buy’ rating with $97.00 price target, explaining this by expectations of increased profitability of the refining sector and positive free cash flow that the company will be able to generate in the next two years. Investors, on the other hand, don’t seem to share the same views, as the number of funds holding shares of Exxon Mobil Corporation (NYSE:XOM) fell to 62 funds among those that we track at the end of the fourth quarter from 71 investors a quarter earlier. Donald Yacktman’s Yacktman Asset Management is one of the funds that slashed their positions in the company as it reported holding 7.01 million shares, down by 50% on the quarter.
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