Last Friday, Paul Tudor Jones‘ Tudor Investment Corp filed its 13F Form with the U.S. Securities and Exchange Commission, disclosing its equity positions as of the end of the fourth quarter of 2013. We have found that the most popular small cap stocks among hedge funds outperformed the market by 18 percentage points even though we started measuring the returns a couple of weeks after 13Fs have been made public. It can also be productive to treat individual 13Fs as free recommendations from fund managers- not necessarily to be followed, but to be considered briefly and then researched further if they seem appealing.
Below, I will look into Tudor’s new stock positions (in which it invested more than $560 million in aggregate). This employee hedge fund sponsor manages separate client-focused portfolios and has an equity portfolio worth more than $2 billion. It’s largest stakes are placed in the ETFs, followed by services and technology stocks.
Tudor’s biggest new bet of Q4 was placed on iShares MSCI South Korea Index Fund(ETF) (NYSEARCA:EWY), an ETF that trades at the New York Archipelago Exchange. The fund started a position with 2.5 million shares, worth more than $161.6 million. However, at InsiderMonkey, we keep our focus on U.S. traded companies, over ETFs and bonds.
Among publicly traded companies, Mr. Tudor Jones seems to feel most bullish about Baidu Inc (ADR) (NASDAQ:BIDU), the large-cap Chinese-language Internet search provider. Despite the company’s industry leading margins, returns, and growth history, its valuation still looks reasonable (at 50 times the company’s earnings, versus an industry average of 44x). Probably betting on these fundamentals, and on the company’s long-term growth prospects, which double its industry’s average, Tudor acquired 195,000 shares of Baidu Inc (ADR) (NASDAQ:BIDU), currently valued at approximately $34.69 million.
The second-runner is the banking giant Citigroup Inc (NYSE:C). Over the fourth quarter, the fund started a position in the company, acquiring 418,951 shares, with a reported value of $21.8 million. Since the purchase, the stock price has been pretty much flat, but an upside may come soon. The stock price is expected to gain ground over the next few years, mainly on the back of an above average EPS growth rate of 19%-20%.
Cardinal Health Inc (NYSE:CAH) – one of the most powerful players within the pharmaceutical supply chain- comes in next among Tudor’s largest new positions. Despite the company’s razor thin margins and returns, poor growth history and above average valuation (at 65 times the company’s earnings), both hedge funds and analysts seem to be quite fond of this stock. Probably, it is its economic moat and dividend yield that make this option attractive. This might be the reason why Tudor procured 304,200 shares of the company, worth about $21.3 million.
Another interesting case is that of ManpowerGroup Inc. (NYSE:MAN), an employment services provider with a market cap of $6 billion. Once again, weak fundamentals have not stopped Tudor from acquiring this stock. A reasonable valuation, a 1.2% dividend yield and decent long-term EPS growth projections, make it an alluring option, notwithstanding. In this context, the fund bought 225,922 shares of the company.
And the last, but not the least is Chicago Bridge & Iron Company N.V. (NYSE:CBI). This integrated engineering, procurement and construction (EPC) services company any provides conceptual design, technology, engineering, procurement, fabrication, construction and commissioning services to customers in the energy, petrochemical and natural resource industries. Although it offers above average margins, and returns on average and equity, and an industry leading net income growth history, this company still trades at only 24 times its earnings, very close to the industry average. In addition, the company pays out a small dividend yield and holds long-term EPS growth projections that double its peers’ mean. This might be the reason behind Tudor’s purchase of 225,300 shares of Chicago Bridge & Iron Company N.V. (NYSE:CBI), the reported value of the stake amounting to $18.7 million.
Disclosure: Javier Hasse holds no position in any stocks mentioned