Christopher Medlock James is the Managing Partner of Partner Fund Management. James cofounded the San Francisco-based fund in 2004 after spending six years in money management. Christopher James co-founded Andor Capital previously. Partner Fund Management has almost $5 billion in assets under management in four different fund. Partner Fund Management’s flagship fund returned 31% in 2007, lost 6% in 2008, gained 21% in 2009, and 4% in 2010. Christopher Medlock James is also the co-owner of the Medlock Ames winery at Bell Mountain. Partner Fund Management had $1.5 billion in its 13F fund at the end of December. That value is spread across 44 positions. This is fair difference from where the fund stood at the end of the third quarter, when it had 57 positions with a collective value of just under $1.10 billion – and those differences are even more pronounced in the actual holdings.
At the end of the third quarter, Partner Fund Management’s largest position was in Lowes (LOW). The fund held 5.36 million shares in the company, with a total value of $103.68 million. As of the end of the fourth quarter, Partner Fund Management’s position in Lowes was roughly half that, with just 2.59 million shares, at a value of $65.66 million. Instead, at the end of the fourth quarter, a new position in Gilead Sciences (GILD) was Partner Fund Management’s largest position. The fund had 3.89 million shares, or approximately $159.10 million, in the company.
Gilead, which is a top pick for both Samuel Isaly’s Orbimed Advisors and Dan Loeb’s Third Point, is a company that we can definitely get behind. When the markets opened on February 15, the company was trading at $54.88 with a one-year target estimate of $58.83 (range $45 to $67). Gilead was also priced low, at just 12.40 times its future earnings, and has low volatility – its beta is just 0.55. Over the last 52 weeks, the company has had great success, returning 38.51% versus the S&P 500’s 1.0%. Bristol-Myers Squibb (BMY), Gilead’s closest competitor has roughly the same upside – it opened at $31.84 on a one-year target estimate of $33.61 and pays a $1.36 dividend (4.30%) – but it isn’t priced nearly as well. Bristol-Myers Squibb has a high forward P/E of 16.43, and it hasn’t returned nearly as much. The company brought in just 24.32% over the last 52 weeks. It’s not that its numbers are bad necessarily; it’s just that they aren’t as good as Gilead’s.
Partner Fund Management’s second largest position at the end of the fourth quarter was in Wyndham Worldwide (WYN). The fund owned just under 3.10 million shares, or $117.24 million, in the company at the end of December. Wyndham opened trading on February 15 at $43.97 a share with a mean one-year target estimate of $48.23 (range $45 to $50). In addition to the upside, Wyndham pays a 60 cents dividend (1.40% yield). It is also priced low, trading at just 12.76 times its forward earnings, and has strong performance. Wyndham returned 36.59% over the last 52 weeks.
Compared to Marriott International (MAR), one of its top competitors, Wyndham shines even brighter. Marriott opened trading on February 15 at $35.22 a share with a one-year target estimate of $37.67. The company pays a dividend of 40 cents (1.10%) but it isn’t enough to make up for the lack of upside. Even more tellingly, Marriott is priced at 21.98 times its forward earnings and has lost over 15% in the last 52 weeks.
Christopher Medlock James’ Partner Fund was also bullish about Rockwell Automation (ROK), Caterpillar (CAT), American Tower (AMT), and Apple (AAPL) at the end of the fourth quarter. Apple is a no-brainer for a large proportion of equity hedge fund managers. When Apple was trading around $370 in early December, we had investors asking us whether Apple will close above $400 at the end of 2011. “There are no guarantees in the stock market, especially we can’t predict what will happen in the very short-term. However, Apple is trading at an extremely low forward PE ratio and the stock should perform well over the next few years,” we responded. Just in 2 short months Apple went up 40% but Apple’s story remains intact. Its earnings surprised to the upside and the stock is still cheap in relation to its forward PE multiples.