Insider Monkey tracks quarterly 13F filings from hundreds of hedge funds, including Moore Global, the hedge fund founded and managed by billionaire Louis Bacon. The primary purpose of our database is to help us research investment strategies (for example, we have found that the most popular small cap stocks among hedge funds outperform the S&P 500 by 18 percentage points per year) but we can also look back a couple years to see which stocks individual managers have liked over the long term. Blindly imitating these picks is unwise, but they can be a source of free initial investment ideas- similar to a stock screen- with investors then doing further research on any interesting names. Read on for our thoughts on the five largest positions in Moore’s most recent 13F which the fund had owned at least $25 million of at the end of March 2011 or see the full list of Bacon’s stock picks over time.
Moore Global reported a position of 5.2 million shares in Citigroup Inc (NYSE:C) as of the end of the first quarter of 2013. With large banks generally doing well in the second quarter of 2013, Citigroup Inc (NYSE:C) recorded 42% earnings growth versus a year earlier. The stock price has more than doubled from its levels a year ago, yet Citigroup Inc (NYSE:C) still trades at a discount to the book value of its equity with a P/B ratio of 0.8. Wall Street analysts expect continued EPS growth, for a forward P/E of 9. Citigroup Inc (NYSE:C) had been one of the most popular stocks among hedge funds in the first quarter of 2013.
The fund has been a long term investor in JPMorgan Chase & Co. (NYSE:JPM), which like Citigroup Inc (NYSE:C) has been producing good financial results going by its recent reports. In book terms JPMorgan Chase carries a premium to Citigroup Inc (NYSE:C), with a market cap slightly above the book value of its own equity, but it has an advantage over many big banks in that its trailing earnings multiple is only 9. At that valuation the company could hold its net income steady over the next several years and still be an attractive value opportunity.
Bacon and his team have also consistently liked News Corp (NYSE:NWSA), which recently split into News Corp and Twenty-First Century Fox. In theory corporate breakups, similarly to spinouts, improve operations as management becomes better able to focus on the core business. Wall Street analysts are predicting that News Corp will generate earnings per share of 55 cents during the current fiscal year (which ends in June 2014), a forecast which implies a current-year P/E multiple of 30. That seems a bit high to be interesting, even with the prospect of better operations.
According to the 13F, Moore Global had a little over 1 million shares of Marathon Oil Corporation (NYSE:MRO) in its portfolio at the beginning of April. Marathon recently spun out its downstream operations under the Marathon Petroleum name in order to become more focused on exploration and production activities. The trailing and forward P/Es of 17 and 12, respectively, show that currently the stock is priced at a premium relative to the larger and more integrated oil majors but that the sell-side does expect net income to grow considerably over the next year and a half.
Marathon Oil therefore seems like it may be worth watching to see if management can in fact deliver the increased earnings that the Street is expecting. Value investors should also be interested in both of Moore’s long term picks in the banking industry (though a portfolio should not be too concentrated in financials) and Assured Guaranty- while it does have some risks- appears to be worth investigating as well given its low earnings multiples.
Disclosure: I own no shares of any stocks mentioned in this article.
