Billionaire Kerr Neilson is the founder and manager of Platinum Asset Management, a large Australia-based investment firm which invests globally. Platinum recently filed its 13F for the third quarter, which discloses many of its long equity positions as of the end of September. Read on for our quick take on some of the fund’s investment themes and compare them to what Platinum has owned in the past.
Tech giants. Microsoft Corporation (NASDAQ:MSFT) had been Platinum’s largest holding at the end of June according to its last 13F, and the fund added shares of the company during the third quarter; it also bought Google Inc (NASDAQ:GOOG) stock and owned a total of about 300,000 shares of that company at the end of September. Google trades at 14 times forward earnings estimates as the market expects it to do a better job in generating earnings growth next year from its core operations and its addition of Motorola Mobility Holdings. That’s not a particularly attractive multiple to us. Microsoft is lower priced, but its forward earnings are likely to be skewed upward as new versions of Windows and Office are released. It could be worth taking a look at the company, but for now the stock price will be very sensitive to the reception of Windows and the new Surface tablet and that looks like quite a risk to us. Billionaire Stephen Mandel’s Lone Pine Capital owned over 1.3 million shares of Google at the end of the second quarter according to that fund’s 13F, while Fisher Asset Management (which is managed by billionaire Ken Fisher) had reported a large position in Microsoft. See more stock picks from Lone Pine Capital and from Fisher Asset Management.
Sina. Neilson and his team also added shares of Chinese Internet company SINA Corp (NASDAQ:SINA), a $3.5 billion market cap owner of websites such as sina.com and weibo.com. The stock is down 31% in the last year, but its recent business performance has been good (revenue came in 11% higher in the second quarter versus the same period in 2011, contributing to a large percentage increase in earnings). However, there’s a decent amount of short interest in the stock and analyst estimates imply a quite high forward P/E of 50. The Chinese exposure is a potentially high-reward situation, but we think that there’s also considerable risk and so all things considered we’d avoid the stock.
Small sales of defensive consumer stocks. PepsiCo, Inc. (NYSE:PEP) and Johnson & Johnson (NYSE:JNJ) were two of Platinum’s top ten holdings at the beginning of the third quarter, and over the next three months the fund sold a small portion of its shares in both companies. Pepsi and Johnson & Johnson are both stable stocks with dividend yields of 3% or higher and betas that are 0.5 or lower, reflecting little sensitivity to broader market conditions. They also both experienced modest declines in earnings last quarter versus a year earlier. Pepsi carries trailing and forward P/E multiples of 18 and 16, respectively, and those seem a bit high to us- there are consumer names with only moderately weaker brands and considerably cheaper pricing. Johnson & Johnson’s forward P/E is only 13, but that figure is dependent on seeing strong earnings growth over the next year and as we’ve seen its business has been struggling recently.
We think that it was a good idea for Platinum to sell some shares of Pepsi and Johnson & Johnson, and would expect that they’ll continue to reduce the size of those positions. Its additions to Microsoft, Google, and Sina, however, aren’t things that we’d recommend investors follow. Apple looks like a better value to us than Microsoft or Google, and those two companies likely need to show good Windows sales and better Motorola margins respectively for us to consider them buys.