Blue Ridge Capital LLC is a New York-based hedge fund that was founded in 1996 by the former president of Julian Robertson’s Tiger Management, John Griffin. The investment management firm employs a long/short investing approach, but is generally more inclined to engage in long positions. Even though John Griffin’s investment strategy is biased towards long positions, the shorts assist the growth of his portfolio during poor market conditions, when returns on long positions are more difficult to come by. Surprisingly, Blue Ridge Capital managed to deliver an exorbitant return of 65% in 2007 simply by running a long/short portfolio. At the same time, the financial crisis of 2008 didn’t hit Blue Ridge Capital too hard, as the fund reported a loss of only 8% at the end of that year. According to the fund’s latest 13F filing, the value of its public equity portfolio was $8.77 billion as of March 31. Our backtests of Griffin’s public equity portfolio during the period of 1999 to 2012 reveal that his top five large-cap (i.e. companies with over $20 billion in market capitalization) stock picks easily outpaced the S&P 500 over this period. Not only that, they even bested the picks of legendary investor and one of the richest men in the world, Warren Buffett. John Griffin’s top five large-cap stocks generated an average monthly return of 0.84% compared to a 0.32% average monthly return for the S&P 500 during the same time span. In this article we will list and discuss the top five, market-beating large-cap picks of John Griffin, which currently includes: Charter Communications Inc. (NASDAQ:CHTR), Actavis plc (NYSE:ACT), Walgreens Boots Alliance Inc. (NASDAQ:WBA), Priceline Group Inc. (NASDAQ:PCLN) and Thermo Fisher Scientific Inc. (NYSE:TMO).
We follow hedge funds like Blue Ridge Capital because our research has shown that their stock picks historically managed to generate alpha even though the filings are up to 45-days delayed. We used a 60-day delay in our backtests to be on the safe side and our research showed that the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. After adjusting for risk, our calculations revealed that these stocks’ monthly alpha was 80 basis points. We have also been sharing and tracking the performance of these stocks since the end of August 2012, during which time they have returned 142%, outperforming the S&P 500 ETF by nearly 85 percentage points (see more details here).
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Charter Communications Inc. (NASDAQ:CHTR) is John Griffin’s top stock pick when measured by the value of shares held. Blue Ridge Capital increased its equity holding in Charter Communications by 210,000 shares during the first quarter, which amounted to an increase of 7.69% to the fund’s overall stake in the company, to 2.94 million shares, which were valued at $567.74 million. The stock has increased by over 3% year-to-date as the company has continuously attempted to enhance its growth and development. On May 26, Charter Communications announced the acquisition of New York-based pay-TV operator, Time Warner Cable Inc. (NYSE:TWC), at a price of $195.71 per share. Around the same time, Charter also revealed its plans to acquiring Bright House Networks, which is the seventh-largest cable-TV operator in the U.S., a deal which will eventually create the leading broadband services and technology company in the country. John H. Scully’s SPO Advisory Corp and Warren Buffett’s Berkshire Hathaway represent some of the largest shareholders in Charter Communications Inc. (NASDAQ:CHTR), owing 6.47 million shares and 5.98 million shares, respectively.
In the second spot on our list of the top five large-cap stock picks of John Griffin is Actavis plc (NYSE:ACT). Blue Ridge Capital reported selling 159,000 shares during the first quarter, ending it with 1.47 million shares worth $436.31 million. On June 4, Sumant S. Kulkarni, an analyst from Bank of America Merrill Lynch, raised the firm’s price target on Actavis to $350 and maintained its “Buy” rating on the stock. He believes that the growth potential of Actavis is not fully priced in, therefore the stock might represent a great buying opportunity, despite the stock having increased by over 16% since the beginning of the current year. Billionaire Andreas Halvorsen holds one of the largest stakes in Actavis plc (NYSE:ACT), consisting of 6.11 million shares valued at $1.82 billion.