HBK Investments’ Latest Stock Picks

Owens Corning logoHBK Investments, managed by David Haley, was founded in 1991 and acts as a multi-strategy hedge fund which pursues arbitrage and absolute return strategies. The financial crisis hit the fund hard as low performance and redemptions cut its assets under management in half. However, HBK generated good returns in 2010. Haley has a law background, with a degree from Southern Methodist University and experience as a corporate and securities lawyer. Many of the fund’s largest investments are in corporate debt but the fund invests in equities as well. We have gone through the fund’s 13F filing for the second quarter of 2012, in which it publicly disclosed many of its positions as of the end of June. Learn more about the fund’s holdings or continue reading for our quick take on some of the stocks that it owns.

Many of HBK’s largest stock positions were companies in the process of being acquired, suggesting that the fund aggressively pursues merger arbitrage opportunities. Hedge funds like to invest in merger arbitrage because they provide uncorrelated returns; the profits or losses from investing in a company set to be acquired generally are independent of market movements. Read more about hedge fund merger arbitrage strategies. One merger target which has not yet closed is software company Ariba, Inc. (NASDAQ:ARBA). The company is set to be acquired by SAP for $45 per share and currently trades at $44.76, though federal regulators must still approve the deal.

Setting aside merger arb plays, the fund’s largest stock position disclosed on the 13F was its 1 million shares of Owens Corning (NYSE:OC). As a composites and building materials company, Owens Corning is tied to the broader economy (beta of 1.7) and to housing activity, which some commentators argue is beginning to rebound. The company itself saw declines in revenue and earnings last quarter compared to a year ago, but the Street expects strong growth next year as Owens Corning’s forward P/E multiple of 13 compares quite favorably to its trailing earnings multiple of 24. The stock is up 54% over the last year, about doubling the S&P 500’s performance.

Time Warner Cable Inc (NYSE:TWC) was another of the fund’s stock picks as it owned 350,000 shares at the end of June. Time Warner Cable, whose market capitalization is a bit under $30 billion, offers cable, Internet, and phone service to residential and business customers. It showed moderate growth in the second quarter of 2012, with earnings up 8% over the same period in 2011. The stock trades at 17 times trailing earnings, which sounds about right for a slow-growing stock with pays a dividend yield of 2.3%. John Shapiro’s Chieftain Capital was another hedge fund owning the stock at the end of the second quarter.

The fund increased its stake in $2.1 billion market cap ultra-deepwater driller Pacific Drilling SA (NYSE:PACD) by 19% to a total of 3.3 million shares. Pacific Drilling is staffing up in anticipation of high demand for its services: it has three currently operating drillships, three more on the way to market, and one on order from a shipyard. The company then contracts its services on a dayrate. Investors are excited about its future prospects, as even on a forward basis its earnings multiple comes in at a fairly high 21. We also think it is possible that demand of deepwater drilling will be more slack than the company is depending on as cheaper onshore production continues to boom.

HBK only owned about 40,000 shares of Priceline.com Inc (NASDAQ:PCLN), but the stock’s high per-share price made it another of the fund’s largest equity positions disclosed on the 13F, at least after excluding some merger arb plays (including those which have already closed). Priceline continues to grow its business despite its large size: its revenue and earnings were up over 20% in its most recent quarter versus the same period last year. It trades at 26 times trailing earnings, but expected future growth brings it down to 17 times forward earnings estimates.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools 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!