Richard Schimel, a former portfolio manager at SAC Capital Advisors, co-founded Diamondback Capital with two other SAC alumni- Lawrence Sapanski and Chad Loweth- in 2005. Schimel previously worked at Morgan Stanley and Deutsche Bank. In early 2012 Diamondback settled insider trading charges with the SEC. Before the investigation drove away many investors, the fund had about $6 billion under management. According to the fund’s 13F filing for the second quarter of 2012 (see more of Diamondback’s portfolio), these were five of its largest positions at the end of June:
Diamondback’s top stock pick was Yahoo! Inc. (NASDAQ:YHOO) as the fund owned 8.8 million shares of the Web portal at the end of the second quarter. This was a small increase from the end of March. Dan Loeb’s Third Point launched a successful activist campaign earlier this year, which included the replacement of Yahoo’s CEO; the company is now run by ex-Google employee Marissa Mayer. Yahoo trades at 18 times trailing earnings, with the Street being optimistic about Mayer’s ability to turn around the company: a 15% bump in earnings per share is expected for 2013, resulting in a forward P/E multiple of 13. The market is less impressed, with Yahoo’s stock down on the year.
$5.7 billion market cap insurance and reinsurance company Everest Re Group Ltd (NYSE:RE) was another of Diamondback’s top holdings. The fund reported a position of about 710,000 shares. On a quantitative basis Everest looks like a good value: its trailing P/E is 9, its forward P/E is 8, and its five-year PEG ratio is 0.6. Investors who are bearish on the U.S. economy don’t have much to worry about either, as the stock’s beta is 0.5. In addition, the company experienced high earnings growth last quarter over the second quarter of 2011. As long as Everest can maintain its current business- and particularly if it can match the trajectory set by analysts- it should make for a good investment.
The third largest position in Diamondback’s 13F portfolio is another insurer. $37 billion Metlife Inc (NYSE:MET) has a broad insurance business which includes life and disability offerings as well as an investment products business. Metlife is another apparently cheap stock, trading at 5 times trailing earnings and 6 times forward earnings estimates. Its earnings last quarter were double what they were a year earlier, and the sell-side thinks there is good future growth here as well: we see a five-year PEG ratio of 0.6, even with Everest’s despite the larger market capitalization.
Diamondback owned about 380,000 shares of Visa Inc (NYSE:V), which was nearly triple what it owned at the end of the first quarter. Visa isn’t quite as cheap as some of the other stocks on this list- its forward P/E multiple is 19- but it has a strong global brand and good growth prospects (revenue was up 11% in its most recent quarter compared to a year ago). The stock has more than doubled the market performance over the last year, up 46% compared to the S&P 500’s 21%.
While Schimel and his team cut their stake in American International Group, Inc. (NYSE:AIG) during the quarter, at the end of June the fund still owned 1.4 million shares. AIG has become a trendy value play among investors who point to its forward earnings multiple of 10, its five-year PEG ratio of 0.4, and the fact that it is only trading at 0.6 times the book value of its equity. Of course, the company also suffers from poor sentiment following its rescue by the federal government during the financial crisis. John Griffin’s Blue Ridge Capital initiated a position in AIG during the second quarter; Griffin used to be second in command at Julian Robertson’s Tiger Management.