A Look At Billionaire Julian Robertson’s Top Dividend Picks

In the world of investing, the name Julian Robertson has always been and will always be synonymous with hedge funds.  Having started one of the earliest hedge funds in the world Tiger Management with only $8 million in 1980, Mr. Robertson turned it into an over $22 billion (AUM) behemoth by the late 1990s. Apart from his stellar track record, Mr. Robertson is also credited for helping out a number of his protégés – many of whom are Wall Street titans today – in starting their own hedge funds. Although Mr. Robertson closed down Tiger Management to outside investors in 2000, he still invests his own money through the fund.

According to Tiger Management’s latest 13F filing, the fund’s US equity portfolio at the end of September was worth almost $750 million, $40 million higher than a quarter earlier. The filing also revealed that technology and consumer discretionary were the fund’s two preferred sectors for investment with stocks from each of them accounting for 29% of the value of its equity portfolio. Though Tiger Management’s equity portfolio was well diversified with long positions in 49 stocks, according to the filing, its top 10 equity holdings alone at the end of September accounted for a large chunk (57.68%) of its total value. Mr. Robertson is a seasoned investor who is always on the lookout for making outsized returns regardless of whether they are generated through stock appreciation, through the hedge funds he invests in or through dividends. In this article we are going to focus on Mr. Robertson’s top five dividend stock picks going into the final quarter of 2015.

At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here).

#5 Ryanair Holdings plc (ADR) (NASDAQ:RYAAY)

– Shares Owned by Tiger Management (as of September 30): 97,297

– Value of Holding (as of September 30): $7.8 Million

Shares of European regional airline Ryanair Holdings plc (ADR) (NASDAQ:RYAAY) appreciated by over 20% during the 2015, but it still sports an attractive annual dividend yield of 2.55%. Although Tiger Management didn’t make any changes to its stake in the company during the third quarter, two additional hedge funds covered by Insider Monkey became bullish on Ryanair Holdings plc (ADR) (NASDAQ:RYAAY) during the same period. According to Ryanair Holdings’ last quarterly results, its net profit margin for the quarter ending September 30 stood at 48.61%, more than four times the net profit margin of several US-based regional and national airlines. However, in spite of this, at 13.69 time forward price-to-earnings multiple, the Ryanair’s stock doesn’t trade at a premium when compared to its US counterparts.

With aviation fuel prices predicted to remain low in the near-term, analysts believe that the airline industry as a whole will continue to do well in 2016. Even though analysts from several firms downgraded Ryanair Holdings plc’s stock one after the other starting in May 2015, that trend changed, when, on November 3, analysts at Raymond James upgraded the stock to ‘Outperform’ from ‘Market Perform’. Thomas Steyer‘s Farallon Capital initiated a stake in Ryanair Holdings during the July-September period by purchasing 539,480 shares of the company.

#4 IAC/InterActiveCorp (NASDAQ:IACI)

– Shares Owned by Tiger Management (as of September 30): 232,300

– Value of Holding (as of September 30): $15.16 Million

IAC/InterActiveCorp (NASDAQ:IACI) is among the few internet and tech companies that consistently pays quarterly dividends to its shareholders (its stock’s annual dividend yield stands at 2.32%). Shares of the company exhibited a classical inverted-V shaped pattern in 2015, ending the year flat after reaching their lifetime high in July. Amid a 17.8% decline of the stock during the third quarter, Tiger Management reduced its stake in the company by 25%. However, other billionaire investors seem to be more bullish on the company as the ownership of IAC/InterActiveCorp (NASDAQ:IACI) among billionaire investors covered by Insider Monkey jumped by two to eight during the third quarter.

Currently the company trades at a forward price to earnings multiple of 17.37 and price to book multiple of 2.70, which is considerably cheaper than most of its industry peers. IAC/InterActiveCorp is expected to report its fourth-quarter earnings on February 1 and analysts forecast EPS of $0.93 on revenue of $864.87 million, compared to EPS of $0.95 on revenue of $830.80 million that it had reported for the same quarter last year.

On December 21, analysts at Barclays reiterated their ‘Overweight’ rating on IAC/InterActiveCorp’s stock, but lowered their price target on it to $82 from $93, which represents a potential upside of over 35% from the stock’s current trading price. Dan Loeb‘s Third Point reduced its stake in IAC/InterActiveCorp by 10% to 2.5 million shares during the third quarter, but still continued to remain the largest shareholder of the company among the funds tracked by Insider Monkey at the end of September.

#3 SeaWorld Entertainment Inc (NYSE:SEAS)

– Shares Owned by Tiger Management (as of September 30): 1.37 Million

– Value of Holding (as of September 30): $24.5 Million

The stock of the theme park operator company SeaWorld Entertainment Inc (NYSE:SEAS) had a forgettable year in 2015 with its shares remaining largely range bound. This lackluster performance of the stock might be the reason why its ownership among hedge funds in our database declined by three to 30 during the third quarter. However, the over 4% annual dividend yield that the company provides seems to have made it attractive to Tiger Management, which increased its stake in SeaWorld Entertainment Inc (NYSE:SEAS) by 80% during the third quarter.

The stock of SeaWorld Entertainment took a major beating in November, after the company reported its third quarter earnings, but managed to recoup all of those losses in December. While analysts had expected it to report EPS of $1.17 on revenue of $509.45 million, the company declared EPS of $1.14 on revenue of $496.90 million.

For the quarter ending December 30, analysts expect SeaWorld to deliver a loss of $0.01 per share, on revenue of $267.43 million, versus the loss of $0.21 on revenue of $264.5 million it reported for the same quarter last year. Another important metric to watch out for when the company releases its fourth quarter and full year results for fiscal 2015 is whether it will be able to reduce its long-term debt, which at the end of December 31, stood at $1.59 billion, for the fourth year in a row. James Dondero’s Highland Capital Management reduced its stake in the company by 26% to 1.66 million shares during the July-September period.

#2 Macquarie Infrastructure Corp (NYSE:MIC)

– Shares Owned by Tiger Management (as of September 30): 339,000

– Value of Holding (as of September 30): $25.31 Million

Macquarie Infrastructure Corp (NYSE:MIC) has turned out to be one of the best dividend paying stocks in the last five years. Not only has its shares appreciated by 230% during that period, but its quarterly dividend has also increased by over fivefold during the same time. Needless to say that with such an impressive performance, hedge funds have lapped up the shares of the company in droves.

At the end of September, the 69 funds tracked by Insider Monkey that reported being long in the stock accounted for almost one-fourth of all outstanding shares of the company. However, shares of Macquarie Infrastructure Corp (NYSE:MIC) have been on a decline for the last six months and  that has caused its annual dividend yield to soar to over 6.5% currently.

Though most analysts who cover Macquarie Infrastructure Corp remain positive on the stock, some have raised concerns whether the company’s heavy debt load will allow it to continue raising its dividend in the future. For the fourth quarter of fiscal 2015, analysts expect the company to report EPS of $0.36, down by 20% on the year. Apart from Tiger Management (which increased its stake by 38%), Robert Boucai‘s Newbrook Capital Advisors also raised its exposure to the company by 31% during the third quarter.

#1 Blackstone Group LP (NYSE:BX)

– Shares Owned by Tiger Management (as of September 30): 1.37 Million

– Value of Holding (as of September 30): $43.58 Million

Owing largely to Tiger Management nearly doubling its stake in the company during the third quarter, asset management giant Blackstone Group LP (NYSE:BX) emerged as the fund’s top dividend pick at the end of September. Shares of Blackstone Group LP (NYSE:BX) reached their lifetime high of $43.66 in May, 2015, but volatility in markets across the globe and redemptions from investors has caused it to recede 33% since then.

Blackstone Group LP (NYSE:BX) is not the only asset management firm that has suffered a huge setback in 2015. As we have elaborated in our previous articles, several fund management companies and hedge funds like JANA Partners had a disastrous 2015. Moreover, negative returns and large amount of redemptions by investors during the year has also forced some well-known  funds like Seneca Capital to close their doors.

The company is expected to report its fourth-quarter results at the end of this month and analysts have a consensus EPS estimate of $0.84 on revenue of $1.8 billion, compared to $1.25 and $1.98 billion, respectively, it reported for the same quarter last year. On December 16, analysts at Credit Suisse reiterated their ‘Buy’ rating on the stock, but reduced their price target to $35 from $39, which represents a potential upside of 28% from the stock’s current trading price. Thomas E. Claugus‘ GMT Capital initiated a stake in Blackstone Group LP during the July-September period and disclosed 1.25 million shares of the company in its latest 13F filing.

Disclosure: None