Billionaire ‘Tiger Cub’ John Griffin’s Favorite Stock Picks For Q4

Blue Ridge Capital is a renowned New York-based hedge fund founded by ‘Tiger Cub’ John Griffin in 1996. Prior to founding Blue Ridge, Mr. Griffin worked directly under hedge fund legend Julian Robertson at Tiger Management. Blue Ridge Capital generally targets ‘absolute returns’ and focuses on individual companies rather than industry sectors when making investment decisions. The fund recently submitted its 13F filing with the SEC for the reporting period of September 30. The filing disclosed that at the end of September  Blue Ridge Capital’s U.S equity portfolio was worth almost $8.7 billion and a major chunk of that, 31%, was invested in stocks from the information technology sector. The filing also revealed that during the turbulent July-to-September period, Blue Ridge Capital’s equity portfolio had a fairly limited quarter-over-quarter turnover of 35.42%, showing the investor remained confident in the long-term prospects of many of his stock picks. In this article we are going to analyze in detail the top five of those stocks which the fund was betting on going into the fourth quarter.

We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 102% since then and outperformed the S&P 500 Index by around 53 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.

#5 W. R. Grace & Co (NYSE:GRA)

 – Shares Owned by Blue Ridge Capital (as of September 30): 3.19 Million

 – Value of Holding (as of September 30): $296.83 Million

Shares of W. R. Grace & Co (NYSE:GRA) have mostly remained range-bound in 2015 and currently trade up by 2.81% year-to-date. This perhaps also explains why Blue Ridge Capital didn’t made any changes to its stake in the company during the third quarter. W. R. Grace reported its third quarter results on October 22, declaring EPS of $1.37 on revenue of $790.10 million. On November 2, analysts at Jefferies Group reiterated their ‘Buy’ rating on the stock, while upping their price target on it to $120 from $113. David Cohen and Harold Levy‘s Iridian Asset Management was the largest shareholder of the company in our database at the end of September.

#4 Autodesk, Inc. (NASDAQ:ADSK)

 – Shares Owned by Blue Ridge Capital (as of September 30): 6.92 Million

 – Value of Holding (as of September 30): $305.45 Million

Blue Ridge Capital hit the bull’s eye by initiating a stake in Autodesk, Inc. (NASDAQ:ADSK) during the third quarter. The almost 12% decline that shares of Autodesk, Inc. (NASDAQ:ADSK) suffered during the quarter coupled with the decline it suffered during the first half of the year had it trading down by more than 25% year-to-date at the end of September. However, since the beginning of October, the stock has seen a massive rally of more than 40%, resulting in it now trading up by nearly 5% year-to-date. On November 19 Autodesk reported its third quarter earnings, beating analyst estimates of EPS of $0.08 on revenue of $591.33 million by declaring EPS of $0.14 on revenue of $600 million. Philippe Laffont‘s Coatue Management also initiated a stake in Autodesk, Inc. during the third quarter by purchasing around 1.4 million shares of the company.

#3 Priceline Group Inc (NASDAQ:PCLN)

 – Shares Owned by Blue Ridge Capital (as of September 30): 263,900

 – Value of Holding (as of September 30): $326.41 Million

Moving on, Blue Ridge Capital sold off 9% of its stake in Priceline Group Inc (NASDAQ:PCLN) during the third quarter, when the stock of the company registered gains of 7.4%. Recently, shares of Priceline Group Inc (NASDAQ:PCLN) have declined by more than 10% after the company came out with its third quarter results and fourth quarter earnings guidance. While the EPS of $25.35 on revenue of $3.10 billion that the company reported for the third quarter was better than the Street’s estimates, the adjusted EPS guidance that it provided for the fourth quarter of between $11.10 and $11.90 was below analyst estimates of adjusted EPS of $12.42. Following the earnings release, analysts at RBC Capital reiterated their ‘Outperform’ rating on the stock, but lowered their price target on it to $1,700 from $1,725. Even after decreasing its stake in the company by 17% to under 1.0 million shares during the third quarter, fellow ‘Tiger Cub’ Stephen Mandel of Lone Pine Capital remained the company’s largest shareholder among the money managers covered by Insider Monkey.

#2 Charter Communications, Inc. (NASDAQ:CHTR)

 – Shares Owned by Blue Ridge Capital (as of September 30): 2.42 Million

 – Value of Holding (as of September 30): $424.68 Million

Charter Communications, Inc. (NASDAQ:CHTR) was one of the few companies in which Blue Ridge Capital reduced its stake significantly during the third quarter, selling 525,000 shares of the company during that period. After witnessing a rally during February and March, shares of Charter Communications, Inc. (NASDAQ:CHTR) have mostly remained range-bound since and currently trade up by 12.38% year-to-date. In May Charter announced that it would be buying larger rival Time Warner Cable Inc (NYSE:TWC) in a $78.7 billion cash-and-stock deal. However, recent reports suggest that this deal may suffer the same fate as the failed Time Warner Cable/Comcast merger, and that even if it does go through, it won’t be completed until the second half of next year. After increasing its stake in the company by 43% during the second quarter, Warren Buffett‘s Berkshire Hathaway added an additional 21% to its holding of Charter Communications, Inc. during the July-to-September period.

#1 Allergan PLC (NYSE:AGN)

 – Shares Owned by Blue Ridge Capital (as of September 30): 1.63 Million

 – Value of Holding (as of September 30): $443.28 Million

Finally, even though Allergan PLC (NYSE:AGN)’s [formerly Actavis, Plc] stock declined by 10.42% during the third quarter, the 11% bump to its position made it Blue Ridge Capital’s top stock, overtaking Charter Communications, Inc. In late October, shares of Allergan PLC (NYSE:AGN) rallied after the news that pharmaceutical behemoth Pfizer Inc. (NYSE:PFE) is in talks to acquire with the company became public. On November 23 Pfizer Inc. (NYSE:PFE) formally announced that it would acquire Allergan PLC in a $160 billion deal. However, the deal has been receiving a lot of flak from U.S. regulators and lawmakers because of the tax savings Pfizer will enjoy in the future if the deal goes through. Shareholders of both companies also don’t seem to be too excited about the deal, as shares of the respective companies failed to take off after the formal announcement was made. Richard Gerson and Navroz D. Udwadia‘s Falcon Edge Capital  increased its stake in Allergan PLC to 592,542 shares during the third quarter.

Disclosure: None