Glenn Dubin co-founded Highbridge Capital Management with childhood friend Henry Swieca over twenty years ago, although Swieca has since left the firm. JP Morgan acquired Highbridge last decade but has kept Dubin on as CEO in a successful example of a financial institution buying a fund. We take a high interest in the firm’s holdings, as we have found that the most popular small-caps amongst hedge funds can lead to substantially high gains compared to market indexes (see how our strategy has returned 29% since last September here). We have examined Highbridge’s newest picks from last quarter, which you can read about below.
Receiving a $61mm investment from the firm, Broadcom Corporation (NASDAQ:BRCM) landed the top spot as Highbridge’s best new stock play. The semiconductor and chipmaker has created a history of beating earnings expectations, with the most recent release at the end of January delivering higher EPS and revenues that grew year over year. Rating agencies Cowen and Piper Jaffray have initiated coverage of Broadcom Corporation (NASDAQ:BRCM) since the announcement, giving the company Overweight and Outperform ratings, respectively. JP Morgan is slightly more reserved, downgrading BRCM to neutral in light of what the firm believes will be a slower adoption of smartphones going into next year. Billionaire Ken Griffin of Citadel Investment Group has built a position of nearly $5mm in Broadcom Corporation (NASDAQ:BRCM) (see his fund’s major positions here).
Transocean LTD (NYSE:RIG) comes in at the second spot on our list, with a $52mm commitment from the hedge fund. Although RIG saw a slight decline in popularity amongst the hedge funds that we cover, Wall Street analysts still have high hopes for the oil rig operator, giving the stock a one year mean price target north of $61, representing a potential 15% jump in price from current levels. Famed investor Carl Icahn has been lobbying Transocean LTD (NYSE:RIG) to pay a $4/share annual dividend and add three new members to its board, with RIG’s counter-response agreeing to a $2.24/share dividend, much to Icahn’s chagrin. An agreed upon amount has yet to be announced. Icahn currently holds about 5.8mm shares in his Icahn Capital fund (view his portfolio’s make-up here).
Eaton Corporation, PLC Ordinary Shares (NYSE:ETN) landed a spot in Dubin’s portfolio with a purchase of 950,000 shares. The diversified power management company has seen strong support from analysts this year, with positive comments from Credit Suisse and ISI Group. Investors who bought in a year ago would be up almost 27% now, all while collecting the high dividend yield of 2.7%. The company added to that dividend last month, pushing it from $0.38 to $0.42. Eaton Corporation, PLC Ordinary Shares (NYSE:ETN) announced the completion of its Cooper Industries acquisition late last year, with the stock gaining 19% since then. Billionaire Mario Gabelli of GAMCO Investors pushed up his ownership to 750,000 shares in Q4 2012 (check out his fund’s top stocks here).
Read on to see the fund’s other new plays.