By law, institutional investors with over $100 million in investment discretion in Section 13(f), are required within 45 days after the end of a calendar quarter to file the 13F form with the SEC. The 13F form discloses all of the US-listed publicly traded holdings in a fund’s equity portfolio. One of the most recent filings belongs to London-based RWC Asset Management LLP. Reading on will take you through five of the largest picks from the 13F filing of RWC. Highlights include Pfizer Inc. (NYSE:PFE), Merck & Co., Inc. (NYSE:MRK), and Eli Lilly & Co. (NYSE:LLY).
Why it is important?
Our selection of the top five positions in RWC’s portfolio is crucial, because studies have shown that average investors can benefit from tracking a hedge fund’s sentiment. According to our research, those who follow the funds we track can outperform the market by as much as 18 percentage points a year.
A top trio
RWC Asset Management decreased the position in Pfizer Inc. (NYSE:PFE) to 636,832 shares, versus 767,085 shares in its last filing. However, the value of the stake increased to $23.2 million, from $19.2 million in the fourth quarter. For the first quarter of 2013, Pfizer Inc. (NYSE:PFE) posted a revenue smaller by 9% on the year to $13.5 billion, however, net income increased by 53% to $2.8 billion. The pharma giant’s diluted EPS advanced by 58% year-on-year to $0.38. Pfizer Inc. (NYSE:PFE)’s CEO Ian Read said in a statement: “As we begin 2013, we continue to generate attractive returns for our shareholder,” and Mr. Market has agreed in earnest. Pfizer’s stock price has popped 16.7% since the start of the year.
In Merck & Co., Inc. (NYSE:MRK), the fund also expanded its position by 102,045 shares. RWC currently owns 500,134 shares, the value of the stake being about $22.5 million, up from $16.3 million at the end of December. The year-to-date return of Merck & Co., Inc. (NYSE:MRK) is 11.7%. The company posted almost $10.7 billion in sales in the first quarter, down from $11.7 billion in the first quarter of the last year. Merck & Co., Inc. (NYSE:MRK)’s EPS also fell to $0.52 from $0.56 a year ago. According to our database, nearly 60 of the 450 hedge funds we track held positions in Merck & Co., Inc. (NYSE:MRK) heading into 2013, third among the major pharmaceutical companies behind Pfizer (77) and Johnson & Johnson (NYSE:JNJ)’s 67-fund mark.
Eli Lilly & Co. (NYSE:LLY) is the last in the top 3 picks of RWC. The fund added 45,334 shares to the position, and the value of the stake surged to 22.4 million, from $17.3 million. Eli Lilly & Co. (NYSE:LLY) posted a flat revenue in the first quarter of $5.6 billion, while the net income jumped by 53% to almost $1.55 billion. Earnings per share increased by 56% on the year to $1.42, and the year-to-date return of Eli Lilly & Co. (NYSE:LLY)’s stock is 10.91%. More than 50 hedge funds were invested in the company, according to our database.
A good pick
Johnson & Johnson (NYSE:JNJ)‘s position in RWC Asset Management’s portfolio almost doubled, the current holding amounting to 213,860 shares, the value of the stake being $17.5 million, compared to the previous stake of 114,454 shares worth about $8.0 million. Shares have returned 21.48% since the start of the year. For the first quarter of 2013, Johnson & Johnson (NYSE:JNJ) reported sales of $17.5 billion, which is 8.5% higher compared to the first quarter of the previous year. Net earnings for the quarter totalled $3.5 billion, and diluted EPS amounted to $1.22. The earnings guidance of Johnson & Johnson (NYSE:JNJ) for the whole year is between $5.35 and $5.45 per share. The company also announced that it has increased the quarterly dividend rate by 8.2% to $0.66 per share.
A tech play out of left field
Microsoft Corporation (NASDAQ:MSFT) is the last of the five largest holdings of RWC’s equity portfolio. Like the previous four mentioned, the fund has enlarged its equity in Microsoft to 528,047 shares, from 478,801 shares. The value of the stake also advanced to almost $15 million, from $12.8 million reported in the previous 13F. Recently, Microsoft Corporation (NASDAQ:MSFT) announced a debt offering of 550 million euro and $1.95 billion of senior unsecured notes. According to a statement issued by Microsoft Corporation (NASDAQ:MSFT), its revenue totalled $20.49 billion for the first three months of the year, up from $17.4 billion a year ago. The operating income of the company increased to $7.61 billion, from $6.4 billion in the first quarter of last year. Diluted EPS surged by 20% to $0.72 per share, and there’s obvious value here trading at a forward P/E below 11.0x.
Conclusion
This “fab five” indicates that RWC Asset Management put a lot of thought investing in large-cap companies, which are more likely to bring stable results over the intermediate-term, and big pharma has a key role. Year-to-date, the healthcare sector has already returned a whopping 18.4%, five full percentage points than any other sector of the economy. It’s easy to see why this hedgie is bullish on this space, and to learn more about why it’s crucial to track hedge funds, continue reading here.
Disclosure: none
