Julian Robertson, who became a billionaire through his success at Tiger Management and also groomed many “Tiger Cubs” who currently manage their own hedge funds, filed his 13F for the first quarter of 2013 in May. Even though the information in 13Fs is a bit old (they disclose many of an investor’s long equity positions as of the end of the previous quarter), there are a couple ways to make use of this information. For one, we use 13Fs to develop investment strategies; we have found, for example, that the most popular small caps stocks among hedge funds generate an average excess return of 18 percentage points per year (learn more about our small cap strategy). We can also screen individual managers’ top picks for stocks which have “high upside potential” in the sense of having low PEG ratios. Read on for Robertson’s five largest positions in stocks with a five-year PEG ratio of 0.9 or lower (or compare these picks to his previous filings).
Robertson reported a position of about 330,000 shares in Chicago Bridge & Iron Company N.V. (NYSE:CBI). Wall Street analysts are expecting high earnings growth at the infrastructure services company: its forward earnings multiple is 12, with a PEG ratio of 0.7. A recent acquisition has caused large increases in revenue and adjusted operating income compared to a year ago. We’d note that Chicago Bridge & Iron has the Warren Buffett seal of approval: the stock was one of Berkshire Hathaway’s new picks during Q1, with the holding company owning 6.5 million shares by the end of March (see more of Buffett’s stock picks).
According to the 13F, Robertson bought almost 450,000 shares of Citigroup Inc. (NYSE:C) after not having owned any shares of the bank at the beginning of 2013. Our database shows that Citi was one of the five most popular stocks among hedge funds during the first quarter of the year (find more of hedge funds’ favorite stocks). While many large banks are attractively priced, Citi deserves mention for its combination of a discount to book value (the P/B ratio is 0.8), analyst optimism (as shown by its low PEG ratio) and the fact that it actually has been delivering growth with earnings up 30% in Q1 versus a year earlier.