Six to seven weeks after the end of each quarter, hedge funds and other large investors file 13Fs with the SEC, disclosing many of their long equity positions in U.S. stocks as of the end of that quarter. While this means there is a bit of a delay in the information, it can still be useful in a few different ways. For example, we work on developing investment strategies based on 13F filings and have found that the most popular small cap stocks among hedge funds produce an average excess return of 18 percentage points per year (learn more about our small cap strategy).
We can also see what individual funds have owned. Eric Mindich was made a Goldman Sachs partner at the age of 27, and founded Eton Park Capital with $3 billion under management in 2004. We have gone through Eton Park’s 13F- which, interestingly, reported that the fund had sold all its shares of Apple Inc. (NASDAQ:AAPL) for any investors interested in researching the fund’s top picks (or see the full list of stocks Eton Park reported owning):
Mindich’s top pick was News Corp (NASDAQ:NWSA), as he increased the fund’s position by 48% to over 28 million shares. The pending News Corp breakup has gotten considerable attention from the hedge fund community; in fact, it was the most popular consumer services stock among hedge funds in the fourth quarter of 2012 (find more consumer services stocks hedge funds loved). This is because the breakup should create opportunities similar to those found in spinout situations, where it is known that management can often improve operations without having to concern themselves with the needs of the parent company.
Eton Park was also buying Dollar General Corp. (NYSE:DG) in the fourth quarter, and had 6.5 million shares in its portfolio at the end of December. In its most recent quarterly report, Dollar General disclosed double-digit percentage increases in both revenue and earnings compared to the same period in the previous fiscal year, including a 21% rise in net income. At 17 times trailing earnings the growth premium to more established retailers is low and we think it’s worth a closer look. Billionaire Stephen Mandel’s Lone Pine Capital owned over 13 million shares of Dollar General according to its own 13F (check out Mandel’s stock picks).
Find three more stocks Eton Park liked, including eBay:
Nielsen Hldg NV (NYSE:NLSN) was another of the fund’s top stock picks as it reported a position of 8 million shares. Nielsen’s net margins were low in 2012, resulting in a fairly high trailing earnings multiple. The sell-side consensus agrees with the market that earnings are likely to rise, with analyst estimates implying a forward P/E of only 14. That seems like a aggressive earnings target to us. Bain Capital’s Brookside Capital initiated a position of 3.4 million shares between October and December (research more stocks Brookside Capital was buying).
Mindich and his team also liked eBay Inc (NASDAQ:EBAY), owning 4 million shares at the beginning of January. SAC Capital Advisors, managed by billionaire Steve Cohen, was buying eBay last quarter and closed December with a total of 4.6 million shares (find Cohen’s favorite stocks). eBay trades at 17 times forward earnings estimates, with earnings growth expected to come from both its e-commerce auction business and its payment operations (which include Paypal). Revenue was up 18% in the fourth quarter of 2012 versus a year earlier.
The 13F reported that Dollar Tree, Inc. (NASDAQ:DLTR) had joined Dollar General among Eton Park’s top stock picks as the fund bought 4.5 million shares. Dollar Tree has also been reporting good financials, though its earnings growth has been based more on improving net margins than Dollar General’s more broadly based improvement. The stock carries trailing and current-fiscal-year P/E multiples of 18 and 14, respectively. Tiger Cub John Griffin’s Blue Ridge Capital was another major Dollar Tree shareholder as of the end of December.
Disclosure: I own no shares of any stock mentioned in this article.
