Quarterly 13F filings from hedge funds and other major investors can be quite useful to the broader investment community. One way that we use these filings is by developing trading strategies from pooling our entire database of filings; for example, our list of the most popular small cap stocks among hedge funds, published in our August newsletter, earned an excess return of 18 percentage points between September and January (read more about our hedge fund strategies).
Kevin Kenny’s Emerging Sovereign Group was seeded by one of the biggest names in investing: legend Julian Robertson’s Tiger Management– after Kenny had spent several years at Morgan Stanley. The fund is now majority owned by the Carlyle Group after a 2011 investment. We have gone through its 13F for the end of December 2012, which we can more or less think of as what Kenny and his team liked entering 2013; using these names as free recommendations to be researched further is another way to make use of 13Fs. Read on for our quick take on five of the fund’s largest holdings and compare them to previous filings.
The fund owned 1.2 million shares of Cognizant Technology Solutions Corp (NASDAQ:CTSH), a $24 billion market cap IT consulting and services company. This was down somewhat from three months earlier, when Cognizant was Kenny’s largest single-stock position by market value. In the third quarter of 2012, Cognizant reported close to 20% increases in both revenue and earnings. The stock is priced for continuing growth at a trailing P/E of 24. Billionaire Stephen Mandel’s Lone Pine Capital increased its own stake by 25% in the third quarter to a total of almost 11 million shares (find Mandel’s favorite stocks).
Priceline.com Inc (NASDAQ:PCLN) was another of Emerging Sovereign’s favorite stocks with the fund owning about 130,000 shares at the start of the year. Priceline is another large-cap growth stock; the trailing and 2013 P/E multiples are 26 and 19, respectively but growth on both top and bottom lines has been very strong. Priceline hopes to continue its growth in the travel website space through its acquisition of Kayak Software Corp (NASDAQ:KYAK), though there have been some concerns about the premium it is paying. Priceline made our list of the most popular services stocks among hedge funds in Q3.
The second most popular stock of all at the same point, Google Inc (NASDAQ:GOOG), was also present in Kenny’s portfolio as Emerging Sovereign increased the size of its position from about 90,000 shares to about 110,000 during the fourth quarter of 2012. Check out the full top ten list. Google Inc (NASDAQ:GOOG) actually reported earnings growth last quarter versus a year earlier, as improved results in the search business overcame the hit to net income from the addition of Motorola Mobility Holdings. The forward P/E, based on expected results for 2014, is only 14 and so Google Inc (NASDAQ:GOOG) may be worth a look.
Emerging Sovereign also liked Mead Johnson Nutrition Co (NYSE:MJN), initiating a position of 1.1 million shares in the food company best known for its infant and children’s food products. Earnings multiples are high here as well- for example, the stock trades at 26 times trailing earnings- but Mead Johnson Nutrition has been recording high earnings growth recently. Billionaire Ken Griffin’s Citadel Investment Group sold shares of the company during the third quarter of 2012 but still closed September with a little over 1 million shares in its portfolio (research more stocks Citadel owned).
Disclosure: I own no shares of any stocks mentioned in this article.
