In the investing world, hedge fund sentiment is an underrated indicator that really can help retail investors beat the market. While the entire industry itself is comprised of thousands of hedge funds, we at Insider Monkey choose to track the top 450 or so—the smart money’s crème de la crème. We recently teamed up with MarketWatch to create the Billionaire Hedge Fund Index, and our small-cap strategy gained an average of 31.6% between September 4th (shortly after we released this to the public) and February 15th, vs. 9.1% for the S&P 500 index (see how to use our market-beating strategy).
With that being said, it’s also important to do a fund-by-fund analysis, so we’re going to take a look at Kris Kristynik’s Longhorn Capital. We’ll take a run through its top five stock picks according to its latest fourth quarter 13F filing with the SEC.
Travelers Companies Inc (NYSE:TRV) and Aon PLC (NYSE:AON) are Kristynik’s No.’s 1 and 2 holdings, and each comprises a little over 1% of the hedgie’s equity portfolio. The size of these positions hasn’t changed since the third quarter, and both insurance behemoths give Kristynik solid exposure to a generally bullish macroeconomic environment. Travelers has a greater focus on the property and casualty arena, while Aon has operations in risk management, brokerage, and HR consulting, and the sell-side expects both companies to generate EPS expansion of 9-10% a year over the next half-decade.
Over the shorter term, Aon has stronger growth prospects, at least according to analyst averages, but Travelers trades at a more attractive PEG ratio of 1.27 versus Aon’s 2.11 mark. Travelers also offers a dividend yield (2.3%) that’s about twice the size of Aon’s, so we can possibly understand why Kristynik has a slightly larger position in the former. Still, both stocks have seen double-digit appreciation (in percentage terms) since the start of 2013, and it’s difficult to argue with Kristynik’s bullishness.
Campbell Soup Company (NYSE:CPB), meanwhile, is an obvious defensive play for this hedge fund manager, and what it lacks in growth it makes up for in value and income. Shares of Campbell currently trade at a 9.5% discount to their peer average on a price-to-earnings basis, and the packaged food company’s dividend yield of 2.9% places it 6th highest out of 35 stocks in its industry. Joining Kristynik in Campbell is a group of notable hedgies, including Ray Dalio, Mario Gabelli and Jim Simons (check out Simons’s favorite stock picks), so there’s clear support from the smart money.
Wal-Mart Stores, Inc. (NYSE:WMT) is Kristynik’s fourth largest holding, and along with other major retailers, the company saw a decent amount of hedge fund capital flight last quarter. Still, this was far better than some of its key peers like Target and Sears, and on the whole, it was the only retailer to have interest from 50 or more funds at the end of Q4. Wal-Mart has had a mild 2013, returning just 2.5%, though there’s plenty here for income and value-oriented investors to like.
What's another reason to be bullish on the retailer?