Bronson Point Partners, a hedge fund founded in 2009 by Larry Foley and Paul Farrell (who had previously worked at SAC Capital Advisors and Pequot Capital, respectively), has filed its 13F for the third quarter of 2012. This document discloses many of a hedge fund (or other major investor)’s long positions to the general public, and so serve as the most comprehensive information we can usually get about what a hedge fund is doing in the market. We’ve gone through the 13F and picked out the fund’s five largest positions by market value. Read on for our quick take on these stocks and compare the fund’s portfolio to previous filings.
The fund’s largest position was its 1.5 million shares of Citigroup Inc. (NYSE:C). The bank has been a good value pick over the course of the year, but with the stock up 29% year to date it’s possible that the pricing has outrun the fundamentals of Citi’s business. It does still look cheap in terms of the numbers- a P/B ratio of 0.6 and a forward P/E of 8- but thus far the bank has been relatively poorly managed compared to some industry peers whose multiples aren’t that much higher. Perhaps it’s trading at a discount, but at a reasonable discount. Read our recent analysis of Citigroup.
Bronson Point reported owning 550,000 shares of Wal-Mart Stores, Inc. (NYSE:WMT) at the end of June. Walmart hasn’t benefitted quite as much from the weak consumer spending earlier this year as the dollar stores did, but its revenue and earnings were up 5-6% in the third quarter from the same period in 2011. At only 15 times trailing earnings, we think that it’s a great company and one of the better values in the retail business. Warren Buffett’s Berkshire Hathaway had owned almost 47 million shares of the stock at the end of June (see more of Warren Buffett’s stock picks).
Nielsen Hldg NV (NYSE:NLSN), which rates consumer activity in retail as well as in TV entertainment, was another of the fund’s favorite stocks. At a market cap of $10.5 billion, it carries trailing and forward P/Es of 32 and 14, respectively. Its pricing, then, is based on the expectation that the business will improve on its recent low growth rates. We’re skeptical that Nielsen can do so, and if we did dig into the business it would probably more likely to be find evidence for taking a short position- that implied growth rate for 2013 seems pretty high to us.
Bronson Point increased its stake in Occidental Petroleum Corporation (NYSE:OXY) from about 120,000 shares at the beginning of July to 400,000 shares three months later. Occidental, a $63 billion market cap oil and gas exploration and production company, is down 20% year to date (tracking oil prices fairly closely) and its earnings numbers last quarter were down about the same amount from the same period in the previous year. It trades at 11 times trailing earnings, which while not high on an absolute basis is higher than what we see at some of its peers. We’d probably prefer to look at some other oil majors such as Exxon Mobil.
Allegheny Technologies Incorporated (NYSE:ATI), a $2.9 billion market cap producer of a variety of metal products (including high performance alloys, flat sheets of steel and other metals, and tungsten products), has fallen 47% in the last year but the fund apparently thinks that has made for a good point to double down (or close to it). It boosted its holdings from 600,000 shares at the end of the second quarter up to 1 million as of the end of September. Its business has been down though with the stock falling as well it has a trailing P/E of 17. Wall Street analysts expect the business to recover, bringing the forward P/E down to 12, and it’s possible that if we looked at the stock and its peers we’d consider it a good value at the current price as well.