Criterion Capital is a long/short investment fund that focuses on technology, media, and telecommunications investments. As of the end of June, over 75% of the value of the fund’s positions were in the technology sector according to Criterion’s 13F. Criterion makes fundamentals-driven investments in quality businesses, utilizing the diversity inherent in the various technology industries to diversify its portfolio, and also takes short positions to help provide absolute returns. Christopher Lord, who has an MBA from Harvard Business School, previously worked in other investment capacities at technology-focused funds. We have analyzed the fund’s 13F from the second quarter of 2012; read on to see our quick take on some of Criterion’s top positions or see a full list of stocks from its filing.
Motorola Solutions Inc (NYSE:MSI) was the fund’s top pick with it owning 2.9 million shares at the end of June. This represented a 45% increase from Criterion’s position in the stock at the beginning of April. The $15 billion market cap communications company trades at 15 times consensus earnings estimates for next year, and it should be noted that it has beaten the final analyst consensus in each of the last four quarters. Motorola Solutions was also the favorite stock of Jeffrey Tannenbaum’s Fir Tree at the end of June.
IT services software company Citrix Systems, Inc. (NASDAQ:CTXS) was another of Criterion’s favorite stocks. The fund added shares here as well and closed the second quarter with 1.6 million shares in its portfolio. Citrix saw double-digit growth rates in both revenue and earnings last quarter compared to the same period in 2011 (earnings, for example, were up 12%) but investors have recognized at least some of its future growth opportunities as the company trades at 40 times trailing earnings. Analysts expect good growth in 2013- 16% higher EPS than their estimates for 2012- but Citirix’s forward P/E multiple of 24 is still fairly high.
Criterion increased its stake in VMware, Inc. (NYSE:VMW) to 1.3 million shares. VMware is a $42 billion market cap cloud infrastructure company which is best known for its vSphere product. This is another tech company priced for strong growth, as well as for its position in cloud computing: the stock trades at 55 times trailing earnings and 31 times forward earnings estimates. However, it saw a significant drop in its margin over the last year and its earnings in its most recent quarter came in lower than in the same period in the previous year despite a 22% rise in revenue.
Creative and professional software company Adobe Systems Incorporated (NASDAQ:ADBE) is a bit more on the value side when compared to some of these other picks. The sell-side expects earnings per share of $2.41 for the fiscal year ending November 2013 as opposed to $2.33 in EPS for the current fiscal year. As such, the stock trades at lower multiples: trailing and forward P/Es of 21 and 14, respectively. Criterion nearly doubled the size of its Adobe position during the second quarter, and Jeffrey Ubben’s ValueAct Capital reported a stake worth about $1 billion in the company.
The fund also liked Check Point Software Technologies Ltd. (NASDAQ:CHKP), with a large increase in its position bringing the total number of shares in its portfolio to 2.2 million. Israel-based Check Point focuses on network and device security and saw good growth over the last year with net income up 17% between last year’s second quarter and Q2 2012. Check Point only trades at 17 times trailing earnings, so while probably a bit pricy to be a pure value stock might certainly qualify as delivering “growth at a reasonable price.” However, the stock is down 13% over the last year against a rising market.