Related ticker: Google Inc (NASDAQ:GOOG)
In 2012, Siddharth Thacker and Brandon Weber launched Signpost Capital Advisors, a hedge fund which currently has about $400 million under management and plans to close to new investors once it reaches $500 million (existing investors would be able to contribute additional capital, at least for now). Thacker and Weber had previously worked at Citadel Investment Group. The fund tends to carry fairly low net exposure.
Signpost and many other hedge funds file quarterly 13Fs with the SEC, disclosing many of their long equity positions from the end of the most recent quarter. We maintain a database of these filings to help us develop investment strategies; we have found, for example, that the most popular small cap stocks among hedge funds outperform the S&P 500 by 18 percentage points per year on average (learn more about imitating small cap picks). Here are Signpost’s five largest holdings by market value as of the beginning of January, according to the 13F on the SEC’s website:
The fund reported a position of about 470,000 shares in Valero Energy Corporation (NYSE:VLO), a refiner and marketer of petroleum products. Downstream energy companies are generally cheap in the current market, and Valero Energy Corporation (NYSE:VLO) is no exception with its trailing and forward earnings multiples both coming in at 7. The sell-side is generally bullish on the company when looking at the next several years and as a result the five-year PEG ratio is 0.8. The stock has risen 86% in the last year; we’d note that its beta is 2.1.
Signpost owned a little over 20,000 shares of Google Inc (NASDAQ:GOOG), making that stock another of its top five picks. Google had made our list of the most popular stocks among hedge funds in the fourth quarter of 2012 (find more of hedge funds’ favorite stocks). In the first quarter of 2013, Google Inc (NASDAQ:GOOG)’s earnings rose by 16% versus a year earlier. The market is expecting the company to continue to achieve growth through its search and Motorola Mobility businesses, and so the trailing P/E is 26.
According to the 13F, Signpost had slightly more than 20,000 shares of Priceline.com Inc (NASDAQ:PCLN) in its portfolio as well. Priceline is actually similar to Google Inc (NASDAQ:GOOG) in terms of its valuation: the trailing and forward P/Es are 26 and 16, respectively, as both investors and Wall Street analysts believe that the travel bookings website will perform strongly over the next couple years and beyond (backed up by revenue and earnings each rising over 20% last quarter compared to Q1 2012). In Priceline.com Inc (NASDAQ:PCLN)’s case, some of this growth may come from the pending acquisition of Kayak.
Thacker, Weber, and their team disclosed ownership of about 360,000 shares of Gildan Activewear Inc (USA) (NYSE:GIL), a $5.1 billion market cap manufacturer of athletic apparel. Revenue rose 8% in its most recent fiscal quarter compared to the same period in the previous fiscal year; earnings growth was much higher in percentage terms, but we don’t think the wide gap between the two figures is sustainable and so net income should increase more slowly going forward. Analyst expectations imply a forward P/E of 14.
B/E Aerospace Inc (NASDAQ:BEAV) rounds out our list of Signpost’s top stock picks from the end of December 2012. The $6.7 billion market cap company manufactures a number of aircraft interior components including seats, oxygen systems, and food and beverage service systems. While the stock trades at 26 times trailing earnings, analysts are projecting large increases in EPS with the result being a forward P/E of only 15 an a five-year PEG ratio of 0.7. Growth numbers have indeed been decent recently, thought that multiple still looks high.
Valero Energy Corporation (NYSE:VLO) looks like an interesting value prospect to us, and we’d encourage investors to do further research on the stock. The rest of the fund’s picks are more dependent on significantly improving their bottom lines. While we certainly wouldn’t rule those companies out- recent financials in each case do show good growth rates, and Priceline.com Inc (NASDAQ:PCLN) in particular continues to have monster quarters- investors would have to develop confidence in analyst forecasts.
Disclosure: I own no shares of any stocks mentioned in this article.
