More and more hedge funds and other notable investors are filing their 13Fs for the fourth quarter of 2012, disclosing many of their long equity positions as of the end of December. While the portfolios are from several weeks ago, there are still a few ways for investors to use the filed information. We have found, for example, that the most popular small cap stocks among hedge funds tend to outperform the market well after 13Fs have been made public. In our August 2012 newsletter, we listed the most popular small cap stocks as of the end of June; between September and January, this list of names produced an excess return of 18 percentage points (read more about our hedge fund strategies).
It can also be productive to treat individual 13Fs as free recommendations from fund managers- not necessarily to be followed, but to be considered briefly and then researched further if they seem appealing. We have picked out the top five stock picks from Russell Hawkins’ Hawkins Capital. Read on for our quick take on these stocks and compare them to previous filings.
Hawkins’ top pick was oil major Royal Dutch Shell plc (NYSE:RDS.A), reporting a position of about 2.3 million shares. Royal Dutch Shell stands out among many oil majors for its high yield (4.7% going by recent dividend payments and the current share price) if an income investor is willing to accept the related commodity price risk. The company’s revenue and earnings were up slightly last quarter compared to the fourth quarter of 2011. At 8 times earnings it could be worth a closer look. Cliff Asness’s AQR Capital Management owned about 550,000 shares at the end of September (see Asness's stock picks).
3 million shares of Oaktree Capital Group LLC (NYSE:OAK) made the $1.5 billion market cap alternative investment manager another of Hawkins’ favorite stocks. Oaktree is another attractive dividend payer, with a yield of over 4% as well. While revenue has been down, Wall Street analysts expect a strong recovery with their consensus estimates implying a current-year P/E of 10 and a five-year PEG ratio of 0.9. Billionaire David Einhorn’s Greenlight Capital has been another investor in Oaktree, with 1.9 million shares in its own portfolio at the end of the third quarter (find Einhorn's favorite stocks).
Find more of Hawkins' favorite stocks, including Intel: