Owing to the meteoric rise it has enjoyed over the past couple of years, billionaire Andreas Halvorson‘s Viking Global is counted among the leaders in the hedge fund industry. The Connecticut-based fund was started by Mr. Halvorson in 1999 along with two other ‘Tiger Cubs’, David Ott and Brian Olson. Mr. Olson left Viking in 2005, while Mr. Ott stepped down from active fund management duties in 2010. In spite of their respective departures, Viking Global has continued to grow at a rapid pace under the leadership of Mr. Halvorson, with assets under management (AUM) almost doubling to over $30 billion between April 2012 and December 2015. Due to the consistent outperformance of his fund, Mr. Halvorson has been routinely ranked among the top earning hedge fund managers on the Street by various publications. Since Viking Global primarily invests in equities and has hit several home runs with its stock picks, in this article we are going to analyze the fund’s top five long-term holdings.
We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).
#5 Canadian Pacific Railway Limited (USA) (NYSE:CP)
– Shares Owned by Viking Global (as of December 31): 4 million
– Value of Holding (as of December 31): $510.60 million
Canadian Pacific Railway Limited (USA)(NYSE:CP) was added to Viking Global’s portfolio in the fourth quarter of 2013. Since then, the fund has made a number of changes to its stake in the company, including a 4% reduction to it in the fourth quarter of 2015. Another fund which reduced its stake in the company during that quarter was David Gallo‘s Valinor Management LLC, which trimmed its holding by 7% to 388,653 shares. Canadian Pacific Railway Limited (USA)(NYSE:CP) has seen a significant erosion in its market capitalization over the past few quarters due to the correction in crude oil and other commodities. However, its stock is currently trading up by 5.25% year-to-date. In an effort to compel Norfolk Southern Corp. (NYSE:NSC) to have merger talks, Canadian Pacific Railway Limited filed a definitive proxy statement for a shareholder resolution on March 29. Since November 17, Canadian Pacific has submitted three public proposals to acquire Norfolk Southern Corp.(NYSE:NSC), but Norfolk’s Board has rejected all of them and has thus far shown no interest having merger talks with Canadian Pacific.
#4 Valeant Pharmaceuticals Intl Inc (NYSE:VRX)
– Shares Owned by Viking Global (as of December 31): 7.8 million
– Value of Holding (as of December 31): $792.2 million
Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is the only stock in this list in which Viking Global increased its stake during the fourth quarter, by 56%. Though shares of Valeant Pharmaceuticals Intl Inc (NYSE:VRX) have appreciated by 50% since the second quarter of 2010 when Viking initiated its stake, they have seen a 90% fall from the levels they were trading at last August. Another hedge fund which has burned its fingers badly on Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is billionaire John Paulson‘s Paulson & Co., which owned 13.26 million shares of the company at the end of 2015. Valeant’s stock is currently trading down by 74% year-to-date, owing largely to the more than 50% drop it suffered on March 15 after the company released preliminary unaudited earnings figures for the fourth quarter and issued disappointing guidance. Prior to the collapse in its stock, several analysts had raised concerns about the company’s aggressive acquisition strategy and the increasing amount of debt on its books. Most analysts are currently of the opinion that investors should stay away from Valeant’s stock until there is more clarity on the company’s financials.
Three of Mr. Halvorsen’s favorite long-term picks are dissected on the following page.