Heading into Q4, Russell Hawkins is betting big on financial and tech sectors, but has also made a notable play for an oil giant. In the latest round of 13F filing, his fund Hawkins Capital has revealed that 30% of its funds are invested in financial stocks, while 24% were pledged to technology stocks. The fund’s equity portfolio was valued at $213 million, with Hawkins having sold out of 3 stocks and initiated 2 new positions, one of which made it into the top 5 holdings and will be analyzed in this article. Based in Houston, Texas, Hawkins Capital is a long/short hedge fund that invests mainly in publicly traded companies. Before starting his own fund, Russell Hawkins managed as much as $8 billion for Dreyfus’ mutual funds. Let’s have a look at his top bets for the fourth quarter and how other hedge fund managers feel about these stocks.
But why do we track hedge fund activity? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect their activity. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period hedge funds’ top small-cap stocks edged the S&P 500 index by double digits annually. The 15 most popular small-cap stock picks among hedge funds also bested passive index funds by around 53 percentage points over the 38 month period beginning from September 2012 (read the details here).
We’ll start off with No. 5 – General Electric Company (NYSE:GE). Hawkins Capital reported a 2% increase in its holding to 587,205 shares valued at $14.8 million. The stock has been a solid performer so far this year, having appreciated by roughly 20% to date. It wasn’t a steady increase, though, as the stock wobbled around without a clear sense of direction most of the year. Having survived the August slump, GE geared up for a rally at the beginning of September and has been unstoppable since then. Hawkins is not the only fund manager betting big on this stock, with Nelson Peltz having initiated a new position in GE and having bought the stock aggressively throughout the third quarter. His fund, Trian Partners reported ownership of 90.5 million shares valued at $2.28 billion, the largest position among the funds we follow.
One of the recent additions to Hawkins Capital’s portfolio, American International Group Inc (NYSE:AIG) is sitting pretty on the fourth place. According to its latest 13F filing, the fund holds exactly 300,000 shares of the insurance giant, worth in excess of $17 million. AIG shareholder’s nerves were seriously tested during the August sell-off, with the stock falling from a high of $65 per share to a low of $55 per share, testing the level again in early September before setting course for North. It was probably at this time that Hawkins felt comfortable buying the stock on the dip. Since then AIG has surged by as much as 16% and is currently up by 12% for the year. In general, hedge funds have been shying away from American International Group Inc (NYSE:AIG), as the number of managers holding a long position declined to 94 from 99 at the end of June. John Paulson, who holds the largest stake in AIG among the managers we follow, was among those who kept their faith and left his position intact. His fund, Paulson & Co, reportedly holds 14.6 million shares valued at $829 million.
Head to the next page to find out what stocks have made it to the top 3.