Farallon Capital Management is one of the largest hedge funds in the world, with over $20 billion in assets under management at the beginning of 2012. Thomas Steyer, who founded the firm in 1986, has become a billionaire due to Farallon’s success over time. As a major investor, Farallon discloses many of its long equity positions in 13F filings six to seven weeks after the end of the quarter. We decided to go through the fund’s most recent filing (research which stocks Farallon owned) and take a brief look at those which satisfied basic value criteria. Here are the five largest holdings in Farallon’s 13F portfolio with trailing and forward P/E multiples of 14 or lower:
One of Steyer’s top ten picks was State Street Corporation (NYSE:STT), with a position of 2.9 million shares in the asset manager and custody bank. Earnings were up last quarter versus a year earlier, though revenue showed a slight decline. The market capitalization of $22 billion makes for a trailing P/E of 12, which would be about right if State Street’s bottom line remained constant going forward. Trian Partners, managed by billionaire activist investor Nelson Peltz, reported owning 9.1 million shares in its own 13F (check out Nelson Peltz's stock picks).
Rockwell Collins, Inc. (NYSE:COL) was another of Farallon’s picks as the hedge fund increased its holdings by 23% to a total of 1.9 million shares. Rockwell Collins provides communications and other electronic systems to government and commercial customers; despite concerns over cuts to military spending, Wall Street analysts seem to be anticipating earnings growth next year. The stock carries trailing and forward P/E multiples of 14 and 12, respectively. Rockwell Collins was one of Valueact Capital’s top stock picks. We think that we would avoid it.