Elite Hedge Fund Betting on Apple Inc. (AAPL), American International Group Inc (AIG) & ‘Income at a Reasonable Price’

Page 1 of 2

Apple Inc. (NASDAQ:AAPL) and American International Group Inc (NYSE:AIG) are the smart money’s top two equity investments, according to our database of consensus filings from the end of the fourth quarter. Let’s take a look at one fund that was invested in both companies heading into 2013.

Hedge funds have their fair share of critics. At Insider Monkey, though, we track 450 of the world’s most elite money managers, and by focusing on their best stock picks, we’ve found some strategies that have historically performed very well against Mr. Market. For more than a decade in our back tests, our small-cap strategy beat the market by 18% a year, and since we’ve started sharing these picks with the public, it has outpaced the S&P 500 by more than 20% (learn how to use this strategy yourself).

Apple Inc. (AAPL)

With this in mind, it’s also important to take a look at individual positions inside each hedge fund’s portfolio, and one fund we haven’t analyzed yet is Brian Jackelow’s SAB Capital. Jackelow’s top three positions comprise almost 50% of his entire equity portfolio, so let’s take a look at this group, starting with No. 1.

Apple Inc. (NASDAQ:AAPL) is the top stock pick in Jackelow’s entire equity portfolio, and against the wisdom of many of his peers, he actually established his position in the tech giant last quarter. Now, this is important because on the whole, aggregate hedge fund interest in Apple Inc. (NASDAQ:AAPL) fell by 15% in Q4, as many managers were either slashing or cutting their stakes entirely. Still, there was a select group of hedgies that used this period to buy when everyone else was selling, including Christian Leone (see Leone’s top picks), Louis Bacon and Larry Robbins in addition to Jackelow.

Clearly, a reason behind any Apple-bull’s sentiment is tied to the company’s bargain bin valuation–shares trade at a PEG near 0.5 and a forward earnings multiple below 9.0x. Key peers Google Inc (NASDAQ:GOOG) and Microsoft Corporation (NASDAQ:MSFT), meanwhile, trade at a premium of more than 250% to Apple’s earnings growth multiple.

Aside from this attractive price, a dividend yield near 2.5% has undoubtedly brought some income-seeking investors into the fold, but an underrated aspect of Apple Inc. (NASDAQ:AAPL)’s future lies in its growth prospects. Yes, EPS growth is decelerating, but Wall Street’s five-year annual forecast (19.0%) is above peers like Google (14.4%) and Microsoft (8.4%) quite handily. Shares haven’t had a good 2013, but it’s worth noting that the average analyst’s price target represents a 43% upside from current levels, more than the appreciation that’s expected of Google (+1.5%) and Microsoft (+16.2%).

Taking the No. 2 spot in Jackelow’s equity portfolio is American International Group Inc (NYSE:AIG), which dethroned Apple Inc. (NASDAQ:AAPL) to become the smart money’s favorite stock last quarter. Aggregately speaking, 142 of the 450-plus hedge funds we track held American International Group Inc (NYSE:AIG) in their portfolios at the end of 2012, versus 134 for Apple. Now, AIG wasn’t a new position for Jackelow in Q4–it was one quarter earlier–plenty of prominent fund managers were taking new stakes in the insurer, from Seth Klarman to Stephen Mandel.

Post-bailout, investors have been particularly kind to American International Group Inc (NYSE:AIG)–shares are up more than 15% since the beginning of last December–and there’s still plenty here for value-oriented investors.

How exactly is this the case?

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!