Iridian Asset Management’s Top Stock Picks

About six to seven weeks after the end of each fiscal quarter, the SEC requires hedge funds and many other large investors to disclose many of their long positions in publicly traded stocks in 13F filings. Iridian Asset Management, a special situations fund managed by David Cohen and Harold Levy, has turned in their homework a bit early and so we have the opportunity to look at what this investment team had in its portfolio at the end of September. Read on for our quick take on the fund’s five largest positions and compare them to previous filings.

Tyco International Ltd. (NYSE:TYC) crept into the top slot in Iridian’s 13F portfolio, as the fund’s position of 5.3 million shares was up from the 5 million that it had reported owning at the end of the second quarter. Tyco recently completed its breakup into three separate businesses, so it is now mostly a fire protection company. It currently trades at 15 times forward earnings estimates and has a market capitalization of just under $13 billion. Read our article from last summer about the investment opportunities in the Tyco breakup. We think it might be best to wait for a full quarter of results from the stand-alone company before taking a position.

Iridian slightly reduced its stake in Wyndham Worldwide Corporation (NYSE:WYN), from 5.1 million shares to 5.0 million. This follows a quarter in which the fund had sold 21% of its Wyndham holdings. The hotel and vacation rentals company saw its earnings fall 9% in the third quarter versus a year earlier, and trades at a fairly high trailing price-to-earnings multiple of 20, but Wall Street analysts expect better performance in 2013 and so the stock trades at 14 times consensus earnings for next year. We’d like to see better results than what the company has done recently, and think that analysts might be being too optimistic.

The fund also liked Omnicare, Inc. (NYSE:OCR), with another small increase in that position to a total of 7.7 million shares. Omnicare is a $3.9 billion market cap healthcare company which provides pharmacy services to senior communities as well as healthcare and correctional institutions. Its earnings doubled last quarter compared to the third quarter of 2011, and the sell-side expects this progress to continue: while its trailing P/E is above 20 it trades at only 10 times forward earnings estimates and at a five-year PEG ratio of 1. We think that it would be worth taking a closer look at the company.

ESL INVESTMENTS

Eastman Chemical Company (NYSE:EMN) was another stock that Iridian sold out of slightly, closing September with 4.5 million shares in the fund’s 13F portfolio. Eastman’s margins have been down, with its most recent quarter showing significantly higher sales than a year earlier but underperforming on the bottom line. It trades at 16 times trailing earnings, and as such would need to rebound in order to justify the current stock price. Eastman is up 49% over the last year and we think that the stock price should stagnate for some time in order to allow the company’s performance to catch up.

Auto parts store AutoZone, Inc. (NYSE:AZO) was another of the fund’s top picks as Iridian bumped its holdings to just over 640,000 shares from about 600,000 three months earlier. Billionaire Eddie Lampert’s ESL Investments had initiated a position in Autozone during the second quarter of the year, as auto-related companies in general become seen as potential value stocks. Autozone trades at trailing and forward P/E multiples of 16 and 12, respectively, and has been experiencing moderate growth. We think that there are better ways to play the auto theme, including the automakers themselves, but investors who don’t like that idea could possible consider Autozone.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

The 10 Fastest Supercomputers in the World

The 10 Best Countries for Doing Business 2015

6 Most Expensive Fruits In The World

10 Worst Airlines in the World

The 10 Biggest Tax Havens in the World to Stash Your Money

The 15 Most Murderous Countries in the World

10 Largest Colleges in the World: Bigger Isn’t Always Better

Comedians in Cars Getting Coffee: The 6 Comedians Seinfeld Needs to Interview

Easy Money: The 10 Most Successful Investors in the World Today

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!