Hedge funds are required to submit 13F filings to the SEC within several weeks of the quarter’s end to disclose many of their long equity positions in U.S. stocks as of the end of the quarter. We’ve found in our research on 13Fs that they can be useful in developing investment strategies; for example, the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year. Edinburgh Partners, a hedge fund managed by Sandy Nairn with an estimated more than $13 billion in assets under management, has already filed its 13F for the second quarter of 2013.
As such this is a fairly up-to-date look at what the fund owns, and while we don’t recommend blindly imitating Edinburgh’s picks it can be useful to treat them as a list of free investment ideas and do further research on any interesting names. Read on for our thoughts on the fund’s five largest holdings, see the full filing on the SEC website, or research Edinburgh’s holdings over time.
Nairn cut his stake in Microsoft Corporation (NASDAQ:MSFT) but still owned a little over 6 million shares at the end of the quarter. With the technology company’s stock price doing well during the quarter, it was his largest holding by market value. Microsoft Corporation (NASDAQ:MSFT) is currently trying to reorganize, and is actually a top performer among the Dow 30 year to date. The rise in the stock price has made it somewhat less attractive as a value stock: the forward earnings multiple is currently 12, and that may be reliant on a temporary boost to earnings from the sales of new versions of Windows and Office.
Another tech pick
Another tech stock which is among Edinburgh’s largest positions despite net sales between April and June is Google Inc (NASDAQ:GOOG). In the first quarter of 2013, Google Inc (NASDAQ:GOOG)’s net income grew by 16% versus a year earlier as the advertising business continues to do well and management integrates the acquisition of Motorola Mobility. Wall Street analysts expect earnings per share to continue to rise, with consensus forecasts calling for $53.30 in EPS next year. At current prices, that makes for a forward P/E of 17. If Google Inc (NASDAQ:GOOG) can continue its good growth numbers beyond that point, it might be a candidate for “growth at a reasonable price” status.