Diamondback Capital’s Top Stock Picks: Yahoo, Visa, Metlife

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:

Dan Loeb THIRD POINT

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.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

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!