Andreas Halvorsen‘s Viking Global is a fund with great returns over its 15-years old history. Since its foundation, Viking’s flagship fund returned on average 19% per year. For 2013, its return reached 23%, while during the first half of 2014, the flagship fund returned around 6%. Mr. Halvorsen also manages a long-only fund that returned 38% last year and more than 9% during the first six months of 2014. A Tiger Cub, Mr. Halvorsen managed to grow his fund to more than $25 billion in assets under management after leaving Julian Robertson‘s Tiger Management.
While Viking Global invests primarily in smid-cap, mid-cap and large-cap stocks, there are several small-cap stocks in its equity portfolio as well. We compiled Viking Global’s historical 13F filings and analyzed the performance of its stock picks. The fund’s small-cap picks, which are represented by companies with a market capitalization between $1.0 billion and $5.0 billion, posted value-weighted average monthly returns of around 0.75% between 2000 and 2012, beating the S&P 500 returns of 0.30% during the same period. Our research has shown that hedge funds’ top small-cap picks outperformed the market by double digits. We have been sharing the list of these stocks in our newsletter since the end of August 2012. They managed to return 119% through December 5th. S&P 500 ETF (SPY) returned 54.3% during the same period. In this article we will take a look at some of the small-cap companies that have been in Viking’s 13F portfolio as of the end of the third quarter. They are represented by Newfield Exploration Co. (NYSE:NFX), ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), Molina Healthcare, Inc. (NYSE:MOH), and Kite Pharma Inc (NASDAQ:KITE).
Newfield Exploration Co. (NYSE:NFX), a $3.50 billion independent energy company, is the biggest small-cap position in Viking’s portfolio. Viking initiated a stake in this company during the second quarter, initially holding 5.36 million shares. During the third quarter, the fund further raised its stake in Newfield Exploration by 69% to approximately 9.02 million shares, valued at $334.49 million. The stock of Newfield Exploration Co. (NYSE:NFX) gained around 18% during the second and third quarters of the year, although since the end of September it has been losing ground, dropping by some 30%.
Newfield Exploration Co. (NYSE:NFX)’s decline can be directly related to the significant decline in oil prices that we have witnessed over the last several months. The company is involved in the exploration, development and production of crude oil, natural gas and natural gas liquids. The drop in the price of these commodities takes a hit at the company’s revenues and therefore profits. However, Mr. Halvorsen probably sees this as an opportunity to buy shares as they are cheap, betting on oil prices to rebound in the near future. In this way, Viking Global’s second-largest position is represented by another oil company, Pioneer Natural Resources (NYSE:PXD), of which the fund owns 6.78 million shares, up by 2.71 million shares on the quarter. Viking also initiated a stake in Cheniere Energy, Inc. (NYSEMKT:LNG), holding 5.45 million shares at the end of September.
Overall, out of some 700 funds that we track, 43 funds disclosed holding shares of Newfield Exploration Co. (NYSE:NFX) in the latest round of 13F filings, versus 44 funds in the previous quarter. At the end of September, these funds held some $1.06 billion worth of company’s stock, down by $169.16 million on the quarter. Aside from Viking, Ken Griffin‘s Citadel Investment Group is another shareholder of Newfield, which raised its stake by 50% during the third quarter to 2.58 million shares.