Select Equity Group is one of the 500 most elite hedge funds we track at Insider Monkey, and like their peers, has recently filed a quarterly 13F form with the SEC disclosing their top long equity holdings. Select Equity is a New York-based hedge fund managed by Robert Joseph Caruso; we’ve picked his four largest stock picks heading into Q2 because it’s important to follow the smart money’s sentiment. Discover the details here.
Top dog
In CBRE Group Inc (NYSE:CBG), the hedge fund disclosed a $275.2 million position, which contains 10,900,033 shares. The holding declined from the previous value of $369.1 million and 18,545,492 shares held. A forward P/E below 15 times year-ahead EPS estimates and a year-to-date return above 24% indicates a rare value-based momentum play is present here, and quite frankly, it’s this opportunity that looks to be why Select Equity is bullish.
CBRE Group Inc (NYSE:CBG) also operates in the commercial real estate services industry, and its global focus has helped it become the largest player in this space. S&P holds a positive outlook on this area of the broader real estate sector, citing improved credit conditions and upward trending capital flows as key reasons to be excited about CBRE Group Inc (NYSE:CBG) and its peers.
Number two
MRC Global Inc (NYSE:MRC) is represented in Select Equity’s 13F portfolio by 8,210,522 shares, worth $270.4 million, up from 6,375,054 shares, worth $177.1 million disclosed as of the end of last year. The company was in the equity portfolio of other 10 “hedgies” in the previous round of 13F filings, and at a forward P/E near 12, MRC Global Inc (NYSE:MRC) is one of the cheapest industrial goods players out there.
One additional bullish factor that most pundits aren’t discussing is MRC Global Inc (NYSE:MRC)’s relationship with PVF Holdings, its largest shareholder. On May 13, PVF distributed its 28.6% stake in MRC Global Inc (NYSE:MRC) to its own shareholders, and in the time since, shares of MRC Global have popped 4.6%. Over the longer-term, increased liquidity should benefit MRC Global Inc (NYSE:MRC)’s stock price, and subsequently, its long-term investors.
Harley
The next on the list is Harley-Davidson, Inc. (NYSE:HOG), in which the hedge fund posted a $266.4 million stake, at 4,997,324 shares worth. In the previous filing, the holding represented 3,664,347 shares, worth about $178.9 million, as Harley-Davidson, Inc. (NYSE:HOG) shares sport a year-to-date return near 19%.
At Berkshire Hathaway Inc. (NYSE:BRK.B)’s annual shareholder meeting, Warren Buffett said of Harley Davidson: “Any company that convinces its customers to tattoo its logo on their chest can’t be too bad,” and he’s right on point. Harley’s brand loyalty is one of its undying strengths, and is a big reason why the sell-side expects continued EPS growth (13-14% a year) over the next half-decade. As a result, Wall Street’s average price target on this stock represents a 10% upside from current levels.
Bakken barges
Select Equity also disclosed ownership of 3,135,998 shares of Kirby Corporation (NYSE:KEX), the value of the stake amounting to $240.8 million. The holding slightly decreased from 4,174,389 shares, worth $248.4 million owned at the end of 2012. Kirby Corporation (NYSE:KEX)’s stock is trading at a forward P/E of 16.x and posts a year-to-date return of almost 30%, on the back of its inland-marine and harbor barge transport service businesses.
More specifically, the company has begun working with Bakken-located E&Ps to transport oil to Gulf refineries via the Mississippi river. According to Fox Business, it is the first large barge operator to undertake such an operation—hence Select Equity’s bullishness.
Final Thoughts
It is important to follow the activity of large hedge funds like Select Equity. In its most recent 13F, the hedge fund disclosed an equity portfolio value of $7.5 billion, up from $6.4 billion in the previous filing.
Kirby is an energy-centric hidden gem involved in the much-discussed Bakken region, while Harley Davidson’s earnings power is an underrated driver of its stock price. MRC Global just underwent a somewhat under-discussed liquidity boost with former major stakeholder PVF Holdings, and CBRE Group Inc (NYSE:CBG) Group is Select Equity’s favorite way to play the housing rebound.
Disclosure: none
