Jeffrey Vinik achieved enormous success as the manager of Fidelity’s Magellan Fund and then as the head of Vinik Asset Management, allowing him to become a billionaire. He returned money to outside investors in 2000 but still files quarterly 13Fs disclosing many of his long equity positions in U.S. stocks. By comparing his filings to previous ones we can see which stocks Vinik bought in the fourth quarter of 2012 (13Fs are also useful for researching investment strategies, and we have found that the most popular small cap stocks among hedge funds generate an excess return of 18 percentage points per year). Read on for our thoughts on the five largest new stock positions reported on Vinik’s 13F and see the full list of his stock picks.
Weatherford International Ltd (NYSE:WFT) was the largest new pick in Vinik’s portfolio at a position of 5.5 million shares. Weatherford is an $8.8 billion market cap oil and gas equipment and services company; its stock price has fallen 25% in the last year, somewhat in line with the business’s lower earnings. While revenue has been up, reduced margins have pulled net income lower. Wall Street analysts think that Weatherford will recover, and the forward P/E is only 8, but we would be cautious when considering an investment. Billionaire Ken Griffin’s Citadel Investment Group was buying shares last quarter (find Griffin’s favorite stocks).
Vinik likes gold miners, counting Barrick Gold Corporation (NYSE:ABX) and NovaGold Resources Inc. (NYSE:NG) among his top five single-stock positions. He added AngloGold Ashanti Limited (NYSE:AU) to his portfolio in the fourth quarter of 2012, reporting ownership of about 910,000 shares. Anglogold is also a favorite of billionaire John Paulson, who has also been bullish on gold miners (check out more stocks Paulson’s fund owns). Anglogold is down 40% in the last year, as gold prices have been down a bit and a substantial gap has opened between gold prices and the prices of most miners.
Find three more stocks Vinik was buying:
The 13F disclosed a new position of 1.9 million shares in Corning Incorporated (NYSE:GLW). Corning is an $18 billion market cap manufacturer of specialty glasses including for electronics displays. It’s also been having problems with its net margins: revenue was up 14% last quarter compared to the fourth quarter of 2011, but net income fell by over 40%. The stock is arguably trading at value levels, with a trailing earnings multiple of only 11, and the dividend yield is close to 3%. Chilton Investment Company, managed by billionaire Richard Chilton, was also buying Corning (research more stocks Chilton liked).
HB Fuller Co (NYSE:FUL) was another of Vinik’s new stock picks, with the filing showing that the billionaire bought about 680,000 shares between October and December. The $2 billion market cap chemicals company specializes in adhesives and sealants. The stock carries trailing and forward P/E multiples of 16 and 13, respectively, so it does not require much earnings growth in order to justify the current valuation. However, recent sales growth has not translated into improvements on the bottom line. While we wouldn’t rule out HB Fuller, particularly as analyst expectations are high, we would not be particularly excited about it either.
Vinik was also buying Kodiak Oil & Gas Corp (NYSE:KOG), which has gotten considerable attention as a growth stock (its stock price is up 54% in the last year). The oil and gas exploration and production company is based in the Bakken Shale, one of the hottest shale plays in the onshore U.S. As a result, despite a trailing earnings multiple of more than 30 Kodiak’s five-year PEG ratio is 0.4 as analysts expect earnings to rise rapidly as the company continues to develop and then produce from its acreage. Billionaire Israel Englander’s Millennium Management is another investor in Kodiak (learn about more stocks in Millennium’s portfolio).
Disclosure: I own no shares of any stocks mentioned in this article.