Hedge Fund Iridian Asset Management’s Stock Picks for 2013

Pharmacy services company Omnicare, Inc. (NYSE:OCR), which focuses on providing pharmacy access to long-term care and assisted living facilities, was another of Iridian’s largest holdings despite a moderate sale of shares in Q4. First Pacific Advisors, which is co-managed by Robert Rodriguez and Stephen Romick, is another major shareholder in Omnicare. Here, the company’s earnings have actually been up but quite a bit of future growth is priced in to the stock at a trailing P/E of 27. The most recent data has 13% of the outstanding shares held short, and we think we would avoid the stock.

The Iridian investment team kept its position in Baxter International Inc. (NYSE:BAX) about constant at 3.7 million shares, allowing the $38 billion market cap medical supplies company to become one of the five largest holdings. Baxter is a bit more of a conventional value thesis with trailing and forward P/Es of 16 and 13, respectively, and modest growth rates of both revenue and earnings last quarter compared to Q4 2011. Billionaire Ken Griffin’s Citadel Investment Group was buying Baxter in the third quarter of 2012 (check out more stocks Griffin was buying).

The fund had initiated a position in Motorola Solutions Inc (NYSE:MSI) between July and September, and Iridian increased its stake further during the last three months of 2012 to enter January with 4.3 million shares in its portfolio. Analyst consensus for 2014 implies a forward price-to-earnings multiple of 14, and it may be worth looking into at that pricing. Billionaire George Soros also liked the stock last summer, adding to his holdings and closing the third quarter with a total of 2.9 million shares (research more stocks Soros owns).

Disclosure: I own no shares of any stocks mentioned in this article.

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