Related Tickers: Apple Inc. (NASDAQ:AAPL)
Peak6 is a diversified financial services firm co-founded in 1997 by Matthew Hulsizer and Jennifer Just, who had previously worked together at Swiss Bank (one of the forerunners of UBS) and in derivatives at O’Connor & Associates. Among other services, Peak6 manages the online brokerage OptionsHouse, advises wealthy individuals, and operates a paper trading site. Peak6 also manages investments under the name Peak6 Capital. In 2010, Hulsizer launched an unsuccessful bid to buy the Phoenix Coyotes.
As a major investor, Peak6 is required to file 13Fs with the SEC disclosing many of its long equity positions in U.S. stocks as of the end of each quarter. We have found that analyzing 13Fs from hundreds of hedge funds and other investors can be useful in developing investment strategies; the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year (learn more about imitating hedge funds’ small cap picks) and we think more strategies are possible as well. We have gone through Peak6’s most recent 13F; read on for our quick take on its five largest holdings by market value as of the end of December or see the full 13F on the SEC’s website.
The fund owned about 90,000 shares of Apple Inc. (NASDAQ:AAPL) as of the beginning of this year. Apple Inc. (NASDAQ:AAPL) reported an 11% increase in revenue last quarter compared to the first quarter of 2012, but thanks to lower margins its earnings actually fell by 18%. The fall in the stock price over the last year has left the current valuation at only 11 times trailing earnings, though some investors are concerned about further decreases in profits. Apple Inc. (NASDAQ:AAPL) lost its place as the most popular stock among hedge funds during the fourth quarter of 2012 (check out more stocks hedge funds loved).
According to the 13F, Peak6 disclosed ownership of about 1 million shares of Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX). Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) is hoping to acquire two oil and gas companies to diversify its commodity mix, but the deal has sent its own stock price down and some shareholders of Plains Exploration and Production, one of the acquisition targets, may vote against the move anyway. The company has also seen the earnings of its current business decline according to recent quarterly reports, likely in part due to poor market conditions for gold.
Peak6 reported about 580,000 shares of Phillips 66 (NYSE:PSX) in its portfolio at the beginning of this year. At a market capitalization of $40 billion, the oil and gas refining and marketing company trades at 9 times consensus earnings for 2014 (similar to what we see at some of Phillips 66 (NYSE:PSX)’s peers). The sell-side is optimistic, with a five-year PEG ratio of 0.7, and Warren Buffett’s Berkshire Hathaway is known to be a major shareholder. The stock price has more than doubled in the last year as investors have loved the business’s improved margins.
QUALCOMM, Inc. (NASDAQ:QCOM) was another of the fund’s top stock picks during Q4. While QUALCOMM, Inc. (NASDAQ:QCOM)’s reported net income did decline in the first quarter of 2013 versus a year earlier, this was because of earnings from discontinued operations in Q1 2012; earnings from continuing operations actually rose 30%, in line with revenue growth. With a trailing P/E multiple of 18, we think that QUALCOMM, Inc. (NASDAQ:QCOM) could potentially be growing fast enough to make it undervalued at these levels and would be interested in researching it further.
The filing showed a position of about 590,000 shares in Citigroup Inc (NYSE:C). At a P/B ratio of 0.8, Citigroup Inc (NYSE:C) continues to carry a considerable discount to the book value of its equity even after a 52% gain in the last year. Earnings have been rising as well, although the forward earnings multiple of 9 is not really out of the ordinary for a large bank at this time (and incorporates quite high expectations from Wall Street analysts). It certainly could be a value play, although we’d want to compare Citi to its peers.
There are a number of interesting companies to check out here. Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) has been arguably cheap for some time, and any possibility of its acquisition attempt failing is worth noting. Phillips 66 (NYSE:PSX), Citigroup Inc (NYSE:C), and Apple Inc. (NASDAQ:AAPL) also look a bit like conventional value stocks, although in Apple Inc. (NASDAQ:AAPL)’s case the business does have to halt its decline to make sense at current levels and we’ve noted that other megabanks might be better buys than Citi. Qualcomm isn’t as conventional in value terms but its recent growth has been high enough that it might offer “growth at a reasonable price.”
Disclosure: I own no shares of any stocks mentioned in this article.
