Billionaire Ken Griffin’s Top Stock Picks

Ken Griffin’s Citadel LLC is once again a leading investment vehicle in the hedge fund industry, after struggling badly during the financial crisis of 2008. In fact, financial risk management magazine Risk Magazine recently awarded the Chicago-based Citadel with the title “Hedge Fund of the Year”, praising the firm’s success in deploying talent and technology to manage risk. The investment powerhouse Citadel was founded by Griffin back in 1990 with the backing of influential hedgie Frank Meyer. The firm’s investment approach focuses on in-depth fundamental research and extensive quantitative analysis, which have been essential for its spectacular performance delivered over the past several years. Citadel LLC’s multi-strategy fund Wellington gained 14.4% in 2015, outperforming peers and broader market benchmarks by a wide margin. However, our data show that Citadel’s 1,840 long positions in companies with market caps of at least $1 billion lost 3.9% last year. With that in mind, let’s proceed with the discussion of Ken Griffin’s largest equity holdings as of the end of the fourth quarter.

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#5 Schlumberger Limited. (NYSE:SLB)

-Shares Owned by Citadel LLC (as of December 31): 5.51 Million

-Value of Citadel LLC’s Holding (as of December 31): $384.20 Million

Citadel LLC cut its stake in Schlumberger Limited. (NYSE:SLB) by a whopping 2.99 million shares or 35% during the final quarter of 2015, ending the year with 5.51 million shares. The shares of the supplier of technology, integrated project management and information solutions to the oil and gas industry are down nearly 21% over the past one-year period, so Ken Griffin and his team might have decided to cut exposure to the depressed and struggling sector. In August 2015, Schlumberger and Cameron International Corporation (NYSE:CAM), a manufacturer of oil and gas pressure control and separation equipment, announced an agreement, under the terms of which Cameron will merge with a wholly-owned subsidiary of Schlumberger. As a result, each shareholder of Cameron will receive 0.716 shares of Schlumberger and $14.44 in cash for each Cameron share owned. In the meantime, the falling customer spending in the oil and gas industry severely impacted the company’s financial performance last year, with its 2015 revenues declining 27% year-on-year to $35.5 billion. The sustained decline in oil prices has forced oil companies to curb spending, which in turn triggered a wave of consolidation among service providers. Ken Fisher’s Fisher Asset Management reported owning 4.23 million shares of Schlumberger Limited. (NYSE:SLB) through its 13F for the fourth quarter.

#4 Pioneer Natural Resources (NYSE:PXD)

-Shares Owned by Citadel LLC (as of December 31): 5.51 Million

-Value of Citadel LLC’s Holding (as of December 31): $384.20 Million

The Chicago-based hedge fund was mildly bullish on Pioneer Natural Resources (NYSE:PXD) during the October-December period, as the fund upped its position in the company by 70,813 shares. The U.S.-focused independent oil and gas exploration and production company has seen its shares decline by 26% over the past 12-month period, due to depressed commodity prices. Just recently, the company announced its plans to reduce horizontal drilling activity by 50% to 12 rigs through mid-2016, but its 2016 production is anticipated to increase by at least 10% despite a lower rig count. Pioneer plans to close down its six rigs in the Eagle Ford Shale play, along with an additional six rigs in other locations. Meanwhile, Pioneer’s capital budget for 2016 totals $2.0 billion, which is down from the $2.2 billion spent last year and lower than the previously-anticipated range of $2.4 billion to $2.6 billion. The capital budget is anticipated to be funded from estimated cash flow amounting to $1.3 billion, assuming average prices of $36.00 per barrel for oil and $2.35 per thousand cubic feet for gas, cash on hand, and proceeds from the sale of the Eagle Ford Shale midstream business. Seth Klarman’s Baupost Group sold out its entire stake of 4.14 million shares in Pioneer Natural Resources (NYSE:PXD) during the fourth quarter.

#3 Lowe’s Companies Inc. (NYSE:LOW)

-Shares Owned by Citadel LLC (as of December 31): 5.54 Million

-Value of Citadel LLC’s Holding (as of December 31): $421.27 Million

Citadel owned 956,395 shares of Lowe’s Companies Inc. (NYSE:LOW) on September 30, but the fund boosted its stake in the company by 4.58 million shares during the final quarter of 2015. This bullish move has turned out to be a bad investment so far, considering that the stock has lost almost 15% since the beginning of the year. But we all known that equity investing is a marathon, not a sprint, so it’s too early to call this bet a failure. Earlier this month, Lowe’s Companies announced an agreement to purchase Canadadian home improvement retailer Rona for approximately $2.28 billion. The soon-to-be combined company will represent the leading home improvement retailer in Canada, thus strengthening the acquirer’s competitive edge against Home Depot Inc. (NYSE:HD) in the $32 billion home improvement market. Lowe’s Companies currently has only 42 Canadian stores, while its main competitor has more than 180 stores. Meanwhile, the company has a forward P/E multiple of 16.37, which is below the 18.86 forward P/E of Home Depot and below the average of 18.8 for the home improvement industry. Iridian Asset Management, founded by David Cohen and Harold Levy, cut its stake in Lowe’s Companies Inc. (NYSE:LOW) by 537,719 shares during the last quarter of 2015 to 7.15 million shares.

#2 Honeywell International Inc. (NYSE:HON)

-Shares Owned by Citadel LLC (as of December 31): 4.53 Million

-Value of Citadel LLC’s Holding (as of December 31): $469.01 Million

Ken Griffin’s fund boosted its Honeywell International Inc. (NYSE:HON) stake by 3.92 million shares during the fourth quarter of 2015. The shares of the diversified technology and manufacturing company are flat over the past one-year period, so what propelled Citadel’s bullishness on the company during the recent quarter? It is highly likely that the company’s attractive dividend yield of 2.34% was among the factors Griffin and his team considered when lifting the stake in the industrial giant. Honeywell pays out an annualized dividend of $2.38 per share, while its dividend payments can be considered quite safe given the company’s convincing bottom-line growth last year. Although Honeywell’s net sales for full-year 2015 decrease 4% year-on-year to $38.58 billion, its net earnings per share grew to $6.04 from $5.33. Moreover, the stock trades at a rather inexpensive forward P/E multiple of 14.27, which is slightly below the average of 14.8 for the industrial machinery industry. It should also be mentioned that Standard and Poor’s, Fitch, and Moody’s have ratings of A, A, and A2 on the company’s long-term debt, so Honeywell is in great financial shape as well. Jim Simons’ Renaissance Technologies LLC added a 767,800-share position in Honeywell International Inc. (NYSE:HON) to its portfolio during the fourth quarter.

#1 Alphabet Inc. (NASDAQ:GOOGL)

Shares Owned by Citadel LLC (as of December 31): 805,708

Value of Citadel LLC’s Holding (as of December 31): $626.85 Million

The Chicago-based Citadel owns 805,708 Class A shares of Alphabet Inc. (NASDAQ:GOOGL) as of the end of 2015, which marks an increase of 1,915 shares quarter-on-quarter. The online advertising company is currently battling Apple Inc. (NASDAQ:AAPL) in becoming the largest company in terms of market cap, after becoming the 12th company that has reached the milestone of being the largest company in the S&P’s 500. The shares of the tech behemoth are up by 29% over the past 12 months. Meanwhile, analysts believe that Alphabet’s shares have more room to run in the upcoming years. The consensus among 30 analysts who recently have raised their price targets on the stock following Alphabet’s stronger-than-expected financial results was $920 per share, which yields an upside of at least 30%. In the meantime, Alphabet has a forward P/E of 17.54, which is somewhat above the average of 16 for the S&P 500. However, the company clearly deserves this high multiple, considering its recent financial performance and its high-potential projects. Lansdowne Partners, managed by Alex Snow, reported owning 1.38 million Class A shares of Alphabet Inc. (NASDAQ:GOOGL) through the fund’s latest 13F filing.

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