We track quarterly 13F filings from hundreds of hedge funds, including Ron Gutfleish’s Elm Ridge Capital. We have found that these filings can be useful sources of investment strategies (for example, we have found that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year) and we also think that it’s possible that investors might use them to identify interesting ideas for further research. Read on for our quick take on Elm Ridge’s five largest holdings from its most recent 13F (which discloses many of its long equity positions as of the end of March) or see the full list of the fund’s stock picks.
Gutfleish increased his stake in Lockheed Martin Corporation (NYSE:LMT) by 38% in the first quarter of 2013. The aerospace and defense company could be an interesting target for income or defensive investors: its dividend yield is 4.2% at current prices, while the stock’s beta is fairly low at 0.5. With markets worrying about the industry seeing weaker conditions as the U.S. government cuts its military spending, a crucial source of revenue, the stock is also not that expensive with a trailing P/E of 13. Billionaire Ken Griffin’s Citadel Investment Group had 2.3 million shares in its own portfolio (find Griffin’s favorite stocks).
Elm Ridge reported a position of 3.9 million shares in MBIA Inc. (NYSE:MBI), a $2.6 billion market cap company which insures public finance securities and provides other structured finance services. Wall Street analyst consensus is for MBIA Inc. (NYSE:MBI) to earn 29 cents per share in 2014, which makes for a forward earnings multiple of 46 at current prices; according to the most recent data, 15% of the float is held short as many market players are bearish on the stock. We’d note that the stock price is highly correlated to the market with a beta of 2.0.
The fund also liked one of MBIA’s peers, Assured Guaranty Ltd. (NYSE:AGO). The sell-side is much more optimistic about this company relative to the market compared to MBIA; the stock trades at only 8 times forward earnings estimates (though we’d be reluctant to rely too heavily on analyst forecasts in either case). It also trades at a small discount to book value with a P/B ratio of 0.9. As with MBIA, Assured Guaranty Ltd. (NYSE:AGO) features a beta of 2.0 suggesting that the stock is highly dependent on market indices holding up.