Ken Griffin’s Citadel Investment Group Bullish on $AAPL $WFC $ETFC

Ken Griffin started trading stock options in 1986, between classes. By his sophomore year, he had enough to launch a convertible-bond arbitrage fund. The market crashed in 1987, just as he was buying, and Griffin struck it rich. By his senior year, Griffin had $1 million in investor money for the same strategy. Today, Griffin is a self-made billionaire and his Citadel Investment Group is one of the largest funds in the world.

Ken Griffin CITADEL INVESTMENT GROUP

When Ken Griffin founded Citadel Investment Group, officially, on November 1, 1990, it had $4.2 million in assets under management. According to a 13F filed with the SEC on February 14, Citadel Investment Group had a portfolio worth almost $44.32 billion, spread across 7,638 positions. In comparison, Citadel Investment Group had just under $41.24 billion in its portfolio, across 7,803 positions, at the end of the third quarter.

The largest of these positions is Apple (AAPL). Griffin had a position in the company worth $1.1 billion or almost 2.80 million shares, at the end of the fourth quarter. We don’t blame Griffin for being bullish about Apple – we are too, so is David Shaw’s D E Shaw. It is a great stock. Analysts like FBR Capital and Mizuho are saying, “buy,” or at least “market outperform,” and with good reason. Apple’s share price is expected to increase over 13% in the next year – it opened trading on February 17 at $503.18 on a mean one-year target estimate of $569.51 (range $270 to $700) – and it is priced low at 10.61 times its forward earnings.

Comparing Apple to its rival Hewlett Packard (HPQ) reveals one of the reasons why Apple is trading at a discount. Hewlett Packard is priced lower relative to its future earnings, with a forward P/E of just 6.60. Tech stocks, especially those related to personal computers, are trading at a discount. Microsoft (MSFT) and Dell (DELL) also have very low forward P/E ratios. The only thing that can justify such low P/E ratios for these stocks is a huge price war where profit margins shrink considerably. So far that’s not the case. These stocks gained around 25% over the past four months but we still think they are cheap.

Ken Griffin nearly doubled his fund’s position in Wells Fargo (WFC) during the fourth quarter, making it one of the largest positions in Citadel’s portfolio as of the end of December. It had $231 million in the company, or 8.38 million shares in the company at the end of the fourth quarter, compared to 4.28 million shares at the end of the third quarter.

As of the open of trading on February 17, Wells Fargo was trading at $30.56 a share on a mean one-year target estimate of $34.78 a share (range $25.45 to $45.00). The company also pays a 48 cents dividend (1.60% yield) and is priced low at 8.57 times its forward earnings. Warren Buffett’s Berkshire Hathaway is a big fan. It all sounds good, but compared to JP Morgan Chase (JPM), its closest competitor, JP Morgan is the winner. JPM has greater upside – it opened trading on February 17 at $38.60 a share on a mean one-year target estimate of $46.36 a share and it pays a $1.00 dividend (2.70% yield). JP Morgan is also priced lower at 7.15 times its forward earnings. Mega-cap financial stocks are another segment of the market where investors are extremely cautious. We believe a diversified portfolio of mega-cap banks will provide some protection and ample upside for contrarian investors.

Ken Griffin remained unchanged in his support of E*Trade Financial (ETFC). He maintained the same 27.4 million shares it had had at the end of the third quarter, however the value of that investment fell, moving to $249.83 at the end of September to $218.10 million at the end of December. E*Trade opened trading on February 17 at $9.29 a share, past its mean one-year target estimate of $9.25 (range $8 to $10). The stock does not pay a dividend either and with a forward P/E of 13.03 it is priced a little high. Looking at E*Trade competitor TD Ameritrade (AMTD), this sentiment is even more pronounced. TD Ameritrade opened trading on February 17 at $17.57 a share with a mean one-year target estimate of $18.74 a share (range $15 to $24). In addition to the upside, TD Ameritrade pays a 24 cents dividend (1.40% yield). It has a little higher forward P/E, but only marginally at 13.36. With all this, we would heartedly recommend TD Ameritrade over E*Trade to investors looking to invest in this market.

Comments
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

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

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!