Hedge Fund Egerton Capital’s Top Stock Picks Include Visa and Disney

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Egerton Capital, a hedge fund managed by John Armitage, has filed its 13F for the end of December. These filings disclose many of a hedge fund or other notable investor’s long equity positions in U.S. stocks several weeks after the end of a fiscal quarter. Armitage co-founded Egerton with Tiger Cub William Bollinger in 1994; the fund has over $4 billion in assets under management. Read on for our quick take on Egerton’s five largest holdings and compare them to the fund's previous filings.

The fund’s top pick was News Corp (NASDAQ:NWSA), which is in the process of breaking up into two separate media companies. Similarly to a spinout situation, the breakup of News Corp has the potential to create shareholder value if management of the new companies is better able to focus on issues impacting what had previously been only a part of a larger business. Read more about why hedge funds like to invest in spinouts. The stock trades at 14 times analyst expectations for earnings in the June 2014 fiscal year. Egerton owned almost 18 million shares of News Corp at the beginning of the year, up from about 15 million shares three months earlier.

Visa, American Express, MastercardArmitage and his team have also added shares of Visa Inc (NYSE:V), closing December with 1.9 million shares of the credit card company in their portfolio. Visa’s stock price is up 55% in the last year, accompanying double-digit rises in both revenue and earnings. The market expects more growth on the bottom line from current levels, given the forward P/E of 19. Visa had been the most popular services stock among hedge funds in the third quarter of 2012 (see the ten most popular services stocks). We think that we might prefer to look at cheaper credit card stocks such as Capital One Financial Corp. (NYSE:COF) or Discover Financial Services (NYSE:DFS).

Disney, another credit card company, and a big bank completed the top five list:

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