Hedge Fund Merchants’ Gate Capital’s Stock Picks for 2013

Airgas, Inc. (NYSE:ARG), a distributor of gases for industrial, medical, and other functions, was another of Merchants’ Gate’s top picks. The fund added a small number of shares after a third quarter in which they had moved heavily into the stock. Billionaire Richard Chilton’s Chilton Investment Company owned almost 1 million shares of Airgas at the end of September (see Chilton’s stock picks). Airgas trades at 22 times trailing earnings, and even though the company experienced 14% earnings growth in the fourth quarter of 2012 versus a year earlier that might be a bit high for a potential value investment.

Capello and his team reported a position of 2.8 million shares in C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), which is a freight transportation and logistics company and therefore one of Expeditors’ peers. Its revenue has been up considerably, resulting in at least temporary high growth rates of net income. It might be well worth investigating how sustainable those growth rates are with the trailing earnings multiple being only 16. Citadel Investment Group, managed by billionaire Ken Griffin, was buying the stock in the third quarter and closed September with 1.8 million shares in its portfolio (find Griffin’s favorite stocks).

Merchants’ Gate sold shares of Ecolab Inc. (NYSE:ECL) but still owned 2.2 million shares of the $22 billion market cap cleaning products and consumer goods company at the beginning of the year. Boykin Curry’s Eagle Capital Management had owned a little under 9 million shares in its most recent 13F filing (research more stocks Eagle owned). Ecolab is another company that is expected to see strong growth: it carries trailing and 2013 P/Es of 38 and 21 respectively. Earnings were up 54% in Q3 2012 compared to the same period in the previous year.

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