Egerton Capital Limited, led by John Armitage, recently filed its 13F with the U.S. Securities and Exchange Commission for the reporting period of March 31, disclosing a public equity portfolio valued at $7.30 billion. London-based Egerton Capital was founded by John Armitage and William Bollinger in 1994. The fund’s strategies are equity long/short and equity long-only. It has $13.5 billion in assets under management (AUM). The fund’s 13F filing showed that it mainly focuses on services, technology, and financial stocks. After analyzing Egerton Capital’s 13F, we found that the fund’s top stocks for the first quarter were Southwest Airlines Co (NYSE:LUV), McGraw Hill Financial Inc (NYSE:MHFI), and Apple Inc. (NASDAQ:AAPL). In this article, we will take a look at each of these top holdings of Egerton Capital.
We track the latest moves of hedge funds as well as monitor their holdings to find actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points between 1999 and 2012, however this 50-stock portfolio also underperformed the market by seven basis points per month. On the other hand, the top 15 small-cap stocks had an average monthly return of 127 basis points per month during the three month holding period that begins two months after the end of each quarter. We have been sharing the stock picks of our small-cap hedge fund strategy since the end of August 2012 and our small-cap strategy has returned over 144% since then, beating the S&P 500 ETF (SPY) by over 84 percentage points over this 2.5+ year period (read the details here).
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Let’s first discuss Southwest Airlines Co (NYSE:LUV), which continues to remain the top holding of Egerton Capital. The investor was bullish on Southwest Airlines Co (NYSE:LUV) during the last quarter, raising its position by 31% to 19.38 million shares, worth $858.7 million. Egerton Capital added Southwest Airlines Co (NYSE:LUV) to its portfolio during the fourth quarter of 2014. Southwest Airlines Co (NYSE:LUV), which operates a passenger airline and has a market cap of $24.95 billion, has lost 14.3% year-to-date (YTD). The company serves 94 destinations across the United States and six additional countries, with more than 3,600 flights a day. Southwest Airlines Co (NYSE:LUV) posted very strong financial results for the first quarter of 2015. Excluding certain items, net income for the quarter was $451 million, or $0.66 per diluted share, representing a prominent increase from $126 million, or $0.18 per diluted share, in the same quarter last year. In a statement, Southwest Airlines Co (NYSE:LUV) said that it returned $381 million to its shareholders during the first quarter 2015 financial period, paying $81 million in dividends and repurchasing $300 million in common stock, or 5.1 million shares. Other investors that see value in Southwest Airlines Co (NYSE:LUV) include Cliff Asness’ AQR Capital Management and Israel Englander’s Millennium Management, holding 5.62 million shares and 2.80 million shares respectively, as of the March 31.