Harvard’s Top Stock Picks

Harvard Management filed its 13F earlier this month, reporting many of its long equity positions as of the end of September. Many of the endowment’s holdings are not reported on the 13F (see previous filings from Harvard Management), and as with many other institutions a good deal of investments are managed by other funds. In addition, some large positions are in exchange-traded funds which give the endowment exposure to a particular desired country or industry. Here are five of the largest stock positions that Harvard Management did report:

Jane Mendillo

Mendillo and her team held their position of 2.6 million shares in Pebblebrook Hotel Trust (NYSE:PEB), a real estate investment trust that owns hotel properties including the Doubletree hotel and conference facility in Bethesda. Its dividend yield of 2.4% is low for an REIT, and its $77 million of operating cash flow on a trailing basis (earnings are generally not very useful in evaluating an REIT) compares with a $1.2 billion market cap. We don’t have much experience evaluating REITs and so we would pass, but investors with more familiarity may appreciate learning about Harvard’s stake here.

Kenexa Corporation (NYSE:KNXA) was another top pick with Harvard Management reporting ownership of 1 million shares at the end of September. Kenexa is an HR management software company whose products help businesses with their recruiting and other functions. Its stock is very sensitive to the overall market, with a beta of 2.8; the stock had been doing well this year even before the company received a buyout offer from IBM in August. At a current price of $45.90 and the transaction set to close at $46 per share, there may not be much room here for a retail investor to get involved. We noted in preparing this analysis that many of Harvard’s top picks as of the end of September were acquisition targets, including some that had closed this quarter. Read more about why large investors like merger arb investments.

The endowment owned about 980,000 shares of $90 billion market cap telecom company America Movil SAB de CV (NYSE:AMX) at the end of September. America Movil is an interesting find: its revenue was up slightly in the third quarter versus the same period in 2011, and higher margins drove net income up 67%. Yet its multiples look appealing: the stock trades at 13 times trailing earnings and 11 times forward earnings estimates. Carlos Slim’s top holding looks like it could be a good value. Tiger Cub John Griffin’s Blue Ridge Capital initiated a position of 4.6 million shares during the second quarter.

Harvard Management reported owning 3 million shares of Hudson City Bancorp, Inc. (NASDAQ:HCBK), a $4 billion market cap retail bank holding company. Hudson City reported poor results last quarter, with revenue and earnings falling at double-digit rates from their levels in the third quarter of 2011. At a 4% dividend yield it might be considered an income stock but we’d warn that dividend payments were essentially cut in half in early 2011. It does trade at a discount to book value, but so do many other more prosperous and larger banks; investors interested in financials might want to look elsewhere.

Another takeover target in the endowment’s portfolio was AMERIGROUP Corporation (NYSE:AGP), which is scheduled to be acquired by fellow health insurance company WellPoint in Q1 2013 at about $92 per share (the current price is $91.40). Its trailing P/E multiple is 36, which would be quite high if the transaction does not close for some reason. If it does close then it’s possible that a highly leveraged investor could earn a small positive return on an investment, but as with Kenexa the economics probably would not work for most retail players.

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

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

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!