Thousands of hedge funds file quarterly 13F holdings with the SEC, though some are inherently better for retail investors to track. Historically, it has been possible to outperform Mr. Market by mimicking the best funds, and our small-cap strategy has already beaten the S&P 500 index by 22.5 percentage points since we introduced it to the public last fall (capitalize on market-dominating strategy).
With that in mind, let’s take a look at one hedgie in particular: Robert Karr’s Joho Capital. Though he holds a relatively concentrated equity portfolio, Karr was honing in on a few stocks in particular at the end of the fourth quarter. Without further ado, here are his top five picks.
Google Inc (NASDAQ:GOOG) has been Joho Capital’s No. 1 holding since the second quarter of 2012, and in Q4, Karr was actually upping his stake in the tech giant by 6%. All in all, Google now accounts for a whopping 26.2% of Karr’s total 13F portfolio, indicating that he’ll remain heavily reliant on the company for the foreseeable future. Since the start of 2013, Google’s stock price has risen by almost 13%, and shares are currently trading just off an all-time high north of $800. Most analysts still expect Google to experience annual earnings growth in the mid-teens over the next half-decade, and a forward P/E of 14.9x indicates there’s still value here.
Mead Johnson Nutrition CO (NYSE:MJN) and Estee Lauder Companies Inc (NYSE:EL), meanwhile, are Karr’s No.’s 2 and 3 picks. Both companies operate in the consumer goods sector, and Mead Johnson focuses on pediatric nutrition while Estee Lauder has its fingers in the household products industry.
Now, what ties these picks together is their potential. Of the 60 S&P 500-listed consumer goods stocks, both Mead Johnson and Estee Lauder lie in the upper third in terms of earnings growth expectations this year. The sell-side is forecasting Mead to sport EPS growth of 19.3%, while Estee’s figure is a bit higher at 23.9%. Both stocks aren’t particularly expensive given these prospects, and Karr is joined by notable hedgies like Cliff Asness, Ken Griffin (see Ken Griffin and Citadel’s new buys) and GAMCO Investors’ Mario Gabelli, who are invested in this duo.
Yum! Brands, Inc. (NYSE:YUM) sits at 4th in Karr and Joho Capital’s portfolio, and it has turned in pretty uninspiring appreciation over the past year. Shares of the restaurant company are essentially flat over the past one-year and six-month time frames, and investors have actually lost close to 2% since the start of 2013.
How does Wall Street view this stock?