Thomas Bailard is the co-founder and current manager of Bailard’s private real estate funds, and has over 40 years of market experience under his belt. Similar to hedgie-turned-author Ken Fisher, Thomas Bailard has written the widely used “Personal Money Management” textbook. Located in Foster City, California, Bailard uses quant and fundamental analyses to choose its investments.
Due to the fact that top-tier hedge funds do exhibit market-beating potential if you know just where to look, we’re going to take a look at some of Bailard’s latest favorite stock picks, including International Business Machines Corp. (NYSE:IBM), Apple Inc. (NASDAQ:AAPL), and Exxon Mobil Corporation (NYSE:XOM).
At the end of the second quarter, Bailard’s top stock picks was IBM, which is down a little over 1% in 2013. The firm’s position in the tech giant has gradually decreased over the past year from about 41,000 shares to a little over 36,000, but its $6.9 million market value still trumps its second largest holding, Microsoft Corporation (NASDAQ:MSFT).
IBM trades at a forward P/E near 10 and a PEG near 1.2, while a dividend yield of 2% is sightly below Microsoft’s 2.8% yield. Chances are, Bailard is in International Business Machines Corp. (NYSE:IBM) for its strong second half outlook (services backlog is a major part of this bullishness), while Microsoft is more of a longer-term tech bet.
Shares of Microsoft Corporation (NASDAQ:MSFT) aren’t particularly cheap at the moment, but if you’re banking on a strengthened partnership with Nokia and continued improvements in the Windows and Surface arenas, it’s understandable why you’d be at least taking a chance on Mr. Softy. Bailard holds a $6.6 million position in Microsoft.
Chevron Corporation (NYSE:CVX) and Exxon Mobil Corporation (NYSE:XOM) sit at No.’s 3 and 4 in Bailard’s equity portfolio, and both energy giants are in the green thus far in 2013. Chevron is up over 12% while Exxon has returned a little under 4%.
It’s likely that Bailard is in Chevron for the value, above-average growth prospects, and deep water potential, while Exxon is more of a “total oil” play.
Last but certainly not least, Apple Inc. (NASDAQ:AAPL) is the fund’s fifth largest holding with a $5.5 million position. Bailard held 100 or so fewer shares of the tech giant at the end of the previous quarter. With Apple, it’s easy to see that the fund is making a clear-cut value play, but we’d expect fair valuation to be reached only if: (1) a deal with China Mobile is completed, (2) a game-changing device is released this fall, or (3) a low-cost iPhone is introduced to emerging markets.
The much-hyped Apple “iTV” could be this game-changer, as could an “iWatch” or a version of Google’s upcoming Project Glass.
Regardless, we’ll be watching Apple Inc. (NASDAQ:AAPL) very closely, in addition to International Business Machines Corp. (NYSE:IBM) and Microsoft Corporation (NASDAQ:MSFT).