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Billionaire Rob Citrone’s Biggest Q4 Moves

Billionaire Rob Citrone‘s Discovery Capital Management recently submitted its 13F filing with the Securities and Exchange Commission, revealing a U.S equity portfolio worth $8.44 billion as of December 31. Our analysis of the fund’s 13F holdings in companies worth over $1 billion shows that Discovery Capital didn’t perform very well in 2015 as its long equity positions produced a weighted average returns loss of 5.7% over that period. However, the recent filing reveals that the fund made some major moves in equities during the last quarter of 2015, resulting in its portfolio experiencing a quarterly turnover of over 100% during that time. In this post, we are going to focus on the five stocks in which the fund made its biggest moves going into 2016.

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. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas (see the details here).

Warren Buffett
Warren Buffett
Berkshire Hathaway

Yum! Brands, Inc. (NYSE:YUM)

– Shares Owned by Discovery Capital Management (as of December 31): 2.2 million

– Value of Holding (as of December 31): $160.87 million

Let’s begin with Yum! Brands, Inc. (NYSE:YUM), in which Discovery Capital Management increased its stake by 76% during the fourth quarter. Compared to most other stocks, Yum! Brands, Inc. (NYSE:YUM) has been fairly resilient to the weakness in equity markets this year, with it currently trading down by only 1.8% year-to-date. The stock currently trades at a reasonable valuation, with a forward price-to-earnings multiple of 17.75, in addition to sporting an attractive annual dividend yield of 2.57%. In December, executives of the company revealed that they are targeting annual earnings growth of 15% after Yum! Brands, Inc. completes the spinoff of its China unit later this year. However, analysts are skeptical about that, since same-store sales at Pizza Hut declined by 8% year-over-year last quarter and were down by 4% for the full 2015 year. Adam Weiss‘ Stillwater Investment Management initiated a stake in Yum! Brands during the fourth quarter, purchasing 318,900 shares.

Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA)

– Shares Owned by Discovery Capital Management (as of December 31): 2.96 million

– Value of Holding (as of December 31): $197.18 million

Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) was a new addition to Discovery Capital Management’s equity portfolio during the fourth quarter. Due to increasing competition faced by the company’s bestselling drugs, it recently reported mixed earnings results for the fourth quarter. While analysts had projected the company to report EPS of $1.29 on revenue of $4.83 billion for the quarter, it reported EPS of $1.28 on revenue of $4.88 billion. For the full 2015 year, revenue from both the generics and specialty drugs segments of the company suffered year-over-year declines. Revenue from specialty drugs declined to $5.2 billion from $5.6 billion, while revenue from the generic segment declined to $9.5 billion from $9.8 billion. Larry Robbins’ Glenview Capital increased its holding in the company by 43% to almost 6.00 million shares during the October-to-December period.

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