We track quarterly 13F filings from hundreds of hedge funds, including billionaire David Harding’s Winton Capital Management. Two of his largest positions are Northrop Grumman Corporation (NYSE:NOC) and Exxon Mobil Corporation (NYSE:XOM).
The largest position in Harding’s 13F portfolio by market value was his more than 940,000 shares of L-3 Communications Holdings, Inc. (NYSE:LLL). The $8.4 billion market cap company provides national security and intelligence systems and solutions, primarily to the U.S. government. With Wall Street analysts looking for a weak impact of federal spending cuts on the company’s earnings, L-E trades at 11 times trailing earnings but 12 times expected earnings for next year. In the first quarter of the year, Cliff Asness’s AQR Capital Management had owned about 480,000 shares of the stock (research more stocks Asness owned).
Another aerospace and defense company at the top of Winton’s portfolio was $22 billion market cap defense contractor Northrop Grumman Corporation (NYSE:NOC). It is valued at 12 times forward earnings estimates; we would say that combined with the L-3 position the fund finds these earnings multiples low enough to outweigh the short-term risks of damaging spending cuts. Net income at Northrop Grumman actually inched up slightly last quarter compared to Q2 2012. Our database shows that large quant fund Arrowstreet Capital had been buying the stock between January and March.
Harding and his team increased their stake in Exxon Mobil Corporation (NYSE:XOM) to a total of about 770,000 shares by the beginning of July. Exxon Mobil Corporation (NYSE:XOM) is another low-growth stock which is trading at close to value levels, with both the trailing and forward P/Es in the 11-12 range. This represents a premium to many other oil majors. Like many other companies in the industry, recent reports show a small decline in sales from their levels a year ago. The Bill and Melinda Gates Foundation Trust was the largest shareholder in Exxon Mobil Corporation (NYSE:XOM) at the end of Q1 out of the filers we track (see more of the foundation’s stock picks).