At Insider Monkey, we’ve brought you comprehensive coverage of hedge funds’ latest fourth quarter 13F filings, and while some pundits may shrug off this data, our research has actually shown that historically, it has been possible to beat the market if you knew where to look. The details of our market-beating strategy can be seen here, and our Billionaire Hedge Fund Index—constructed in collaboration with MarketWatch— returned 24.3% in 2012 alone, outpacing the S&P 500 ETF by 8 percentage points.
Ken Griffin, manager of the iconic Citadel Investment Group (see full profile), is truly one of the smart money’s best and brightest gems. A multi-billionaire, Griffin’s investment fund focuses quantitative-based strategies, and we’d compare the sheer enormousness of his equity portfolio to the likes of Steven Cohen or Ken Fisher. Unlike a David Einhorn or Warren Buffett, who typically concentrate their 13F capital in fewer than 50 companies, Griffin has a broader focus, choosing to invest in thousands of positions depending on the quarter.
Still, that doesn’t mean that it’s not important to track which trends and top stocks are in the hedge fund manager’s portfolio; this is the information that can help everyday investors. Let’s take a look at a few key moves we noticed in Ken Griffin’s Q4 13F filing.
Aggregately speaking, the greatest percentage of Citadel’s equity holdings tend to fall in the technology sector, though it’s important to note that Griffin and his investment team made some key buys in the energy space over the past quarter.
Mid-cap oil and gas E&P Gulfport Energy Corporation (NASDAQ:GPOR) was among the top five largest new positions for Griffin in Q4, and for good reason; shares had popped more than 22% in this period alone. Gulfport has seen its annual earnings grow by nearly this same percentage over the past five years, and the sell-side expects its EPS to double by the end of this year. Mr. Market has been bullish over the company’s impressive Utica Shale results, and the stock still isn’t particularly expensive given its above-average margins.
Some other energy companies that Griffin and his fund established new, yet smaller positions in include CVR Energy, Inc. (NYSE:CVI), Diamondback Energy Inc (NASDAQ:FANG), Star Gas Partners, L.P. (NYSE:SGU), and NuStar GP Holdings, LLC (NYSE:NSH). Of this particular group, Citadel held an array of call and put options on CVR and NuStar GP at the end of third quarter, and this duo has already gained an average of 13% this year.
Diamondback Energy and Star Gas have generated returns in the mid-double-digits in 2013 as well, proving that despite being the fourth-worst performing sector year-to-date, there have been plenty of opportunities in energy.
Confidence in Apple Inc. (NASDAQ:AAPL)
Apple Inc. (NASDAQ:AAPL), meanwhile, saw a vote of confidence from Griffin and Citadel, as the hedge fund upped its stake in the tech giant from around 545,000 shares to a little over 1 million last quarter. Much like George Soros, Griffin chose to come close to doubling down on his Apple bet, despite the fact that bulls saw their shares fall by more than 20% in this three-month period. It is obvious that Apple Inc. (NASDAQ:AAPL)’s valuation is the definition of “bargain-bin,” but it’s quite possible that investors won’t truly appreciate this stock unless there’s more value creation moving forward (see what David Einhorn had to say about this situation).
In what was perhaps the most noteworthy move made by Citadel last quarter, Griffin and his team upped their stake in McDonald’s Corporation (NYSE:MCD) by 373-fold.
Why was this the case?
Thinking about this mind-boggling move another way: the hedge fund held a little under 14,000 shares of the fast food operator at the end of Q3, and one quarter later, this position spiked to more than 5.1 million shares.
McDonald’s has generated a modest mid-single-digit return in 2013 thus far, and the company did beat Wall Street’s earnings estimates when it reported Q4 results in January. Worries over last month’s less than stellar same-store sales numbers in Europe and parts of Asia have weighed on the stock of late, but analysts’ average price target still foresees a 6%-7% upside from current levels.
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