We track quarterly 13F filings from hundreds of hedge funds, including Glenn Greenberg’s Brave Warrior Capital, using the results to help us develop investment strategies (we have found, for example, that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year). The information from individual managers’ filings, even though it is a bit out of date by now (the most recent 13Fs disclose many of a fund’s long equity positions as of the end of March) can still serve as a list of free investment ideas that investors can study further if they find any interesting names. Here is our quick take on Brave Warrior’s five largest holdings from its most recent 13F (or see the full list of stocks the fund reported owning).
Greenberg and his team reported a position of 6.6 million shares in Valeant Pharmaceuticals Intl Inc (NYSE:VRX) in the filing. The company’s stock price has risen over 90% in the last year, giving it a valuation of $28 billion. Thanks in part to acquisitions, Valeant has been experiencing large percentage increases in revenue and operating income, but during Q1 2013 its net losses roughly doubled versus a year earlier due to higher operating costs and interest expenses. We would recommend avoiding it at least until we can be more confident in its earnings performance.
Another healthcare stock in the fund’s portfolio was its close to 4 million shares of pharmacy benefit management services company Express Scripts Holding Company (NASDAQ:ESRX). Following the settlement of its dispute with Walgreens, Express Scripts’s business has rebounded nicely and it currently trades at 13 times forward earnings estimates (with an annualization of the numbers from recent quarters placing the stock close to value territory as well). We’re interested in pharmacy related businesses as the population ages, potentially driving demand for benefit management services higher, and consider Express Scripts a potential value opportunity.
VistaPrint Limited (NASDAQ:VPRT) was another of Brave Warrior’s top picks with the filing disclosing ownership of 5.7 million shares. The $1.7 billion market cap printed marketing materials company (for example, it produces business cards, envelopes, and calendars) saw its revenue rise 12% in its most recent quarterly report compared to the same period in the previous fiscal year with profitability improving as well. However, market prices already account for a good deal of future growth with a trailing P/E of more than 50 and over 40% of the float is held short.