Bain Capital’s Hedge Fund Likes Dollar General and More

The fund initiated a position of about 600,000 shares in AutoZone, Inc. (NYSE:AZO) between October and December. Autozone, interestingly, is another stock whose price tends to be unrelated to changes in the broader market as the beta here is 0.2. At a market capitalization of $14 billion, the auto parts store is valued at 16 times its trailing earnings. We’d note that revenue and earnings were actually down last fiscal quarter compared to the same period in the previous fiscal year. Viking Global, managed by billionaire Andreas Halvorsen, was also buying Autozone in the fourth quarter of 2012 (find Halvorsen’s favorite stocks).

The 13F also disclosed a new Brookside position in Sensata Technologies Holding N.V. (NYSE:ST), a $5.8 billion market cap manufacturer of technical sensors and controls. Tiger Cub John Griffin’s Blue Ridge Capital is another major holder of the stock. In the fourth quarter of 2012, net income was up strongly, though a small decline in sales indicates that Sensata may have trouble sustaining its earnings growth. In addition, the trailing earnings multiple of 33 suggests that considerable improvements are already accounted for in the current price. We think that we would avoid Sensata for now.

EMC Corporation (NYSE:EMC) rounded out Brookside’s top five stock picks. The $49 billion market cap data storage company is down 18% in the last year, though last quarter it experienced modest growth in revenue and earnings compared to the fourth quarter of 2011. EMC carries trailing and forward P/E multiples of 19 and 11, respectively, so while it looks a bit pricy in terms of its current performance the sell-side appears to think that earnings will grow rapidly over the next two years. EMC joined Apple Inc. (NASDAQ:AAPL) and more on our list of the most popular tech stocks among hedge funds for the fourth quarter of 2012 (see our top ten list).

Disclosure: I own no shares of any stocks mentioned in this article.