Q3 Recap: Apple Inc. (AAPL) Was One of This Billionaire’s Big Sells

TUDOR INVESTMENT CORPApple Inc. (NASDAQ:AAPL) was Paul Tudor Jones and Tudor Investment’s fourth largest 2Q 13F holding and its single largest public stock holding, but during 3Q, Tudor dumped over 90% of its shares, sending Apple down to 59th place. Tudor was doing plenty of buying and selling, shaking up his portfolio across the board in 3Q, much as he has done in previous quarters. Tudor does invest with a traders mentality, one that has proved quite successful. Thanks to his success, Tudor has the ability to charge above average fees – charging a 4% management fee on AUM and 23% performance fee – versus the typical 2-and-20 structure.

Apple Inc. (NASDAQ:AAPL) is down over 15% since the end of 3Q as the luster of the stock appears to have wore off. By all accounts the tech giant appears cheap on a valuation basis, trading at 13x earnings, compared other industry giants Microsoft (15x) and Google (22x). The company’s five year EPS growth run has been impressive, growing 70% annually, but its $500 billion market cap leads to growth concerns.

The expected growth rate for the next five years is a mere 22% annually. Despite launching a new iPad, iPhone and iPad mini this year, the stock remains pressured. We see the increasing rate for product introduction into the market as a downside that puts margin pressures on the company. Although it would appear that there is little middle ground for an investors – being either a love or hate – we would rather sit on the sidelines with Tudor for now. Apple also saw big selloffs from other top funds Samlyn Capital and Renaissance Technologies, of 80% and 60% respectively. Regardless of Tudor and other top managers’ disinterest, Apple was still the top stock pick for hedge funds last quarter, in aggregate terms.

Johnson & Johnson (NYSE:JNJ) was a new 2Q position for Tudor, but the fund lost interest quickly last quarter, dumping 98% of its shares – dropping Johnson and Johnson from Tudor’s 5th largest 13F holding to 292nd. We see valuation concerns for Johnson & Johnson and better investment opportunities as a reason to look elsewhere. Johnson & Johnson trades in line on a profit margin basis with major drug producers Merck and Pfizer, but carries an almost 20% premium to these peers on a trailing P/E basis at 23x. The drug maker also pays one of the lower dividends in terms of drug companies at a 3.5% yield.

McKesson Corporation (NYSE:MCK) was another stock that Tudor quickly fell out of love with, much like Johnson & Johnson and Apple Inc. (NASDAQ:AAPL). His 2Q position was an increase in shares of 150%, but Tudor sold off 98% of its shares in Q3, putting the healthcare company down to 450th from 6th in Tudor’s 13F holdings. Revenues are expected to slow for McKesson in fiscal year 2013, with relatively flat growth. The recent acquisition of PSS World Medical should add around $0.15 to EPS next year, coupled with cost synergies topping $100 million over the long term. We believe the company is properly valued, trading in line with competitor AmerisourceBergen at 14x. Tudor saw few catalysts for the stock prior to the acquisition of PSS, but with the addition, the stock could be worth looking at based on future growth.

Express Scripts Holding Company (NASDAQ:ESRX) was one of the stocks that Tudor sold its entire position in. The fund took an essentially new position in the stock during 2Q that made it Tudor’s 11th largest 13F holding. Express Scripts’s recent Medco acquisition will lead to synergies, but will also bring the loss of a major contract for Medco with UnitedHealth. Other concerns for investors include management’s opinion of 2013 analyst estimates, labeling them ‘overly aggressive’. Consensus estimates put this year EPS growth at 25% and 14% next year. We believe the setbacks will continue for Express due to the Walgreen fallout.

V.F. Corporation (NYSE:VFC) was another stock that Tudor dumped all of its holdings in last quarter. In 2Q, Tudor had taken a new position that made VF its 16th largest 13F position. The apparel company’s shift to a more profitable Outdoor segment will hurt top line in the interim, should this winter be unusually warm again. VF is also working on integration of its Timberland acquisition which should add $1.10 to 2012 EPS, compared to the $0.60 it added in 2011. Check out whether V.F. is one of the best-in-industry apparel companies.

On the whole, it appears that the uncertainty in healthcare reform and how it will impact coverage and reimbursement rates may have played a role in Tudor’s decision to cut many of its pharma stocks. The other major selloff, Apple Inc. (NASDAQ:AAPL), is a product of growth concerns, while the selloff in VF might be a changing of the guard, so to speak, as competition in the apparel industry is undoubtedly heating up.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!