In the hedge fund universe, 13F filing season is here, and we’re bringing you up-to-date coverage of this situation. Our research has shown that hedgies’ consensus stock picks beat the market handily, and the MarketWatch Insider Monkey Billionaire Hedge Fund Index supports this notion even further. In 2012, this index returned 24.3%, beating the S&P 500 ETF (SPY) by 8 percentage points (use our market-beating strategy).
Dan Loeb, founder of the New York-based hedge fund Third Point, has built up a stellar reputation amongst his peers. With an equity portfolio in excess of $5 billion, Loeb’s stock picks are worth paying attention to, and his track record in activist investing is one of the best. Let’s take a look at some of the key moves he made last quarter, in addition to the Herbalife dramatics that we’ve previously covered. Details about that can be read here.
Cut Apple, Add Electronic Arts
At the end of the third quarter, Apple Inc. (NASDAQ:AAPL) was one of Dan Loeb’s top three holdings, along with AIG and Yahoo! In his latest 13F filing, though, we’d discovered that Loeb sold his Apple position, choosing to add a range of equity investments. While many value-focused hedge funds are doubling down on their Apple positions, Loeb’s decision to cut Cupertino entirely has proven to be the correct move so far. AAPL is down more than 12% year-to-date, part of the longer swoon that has plagued shares.
Now, it’s quite possible that Loeb could become interested in this stock again, but it’s interesting to take note of one particular stock the hedge fund manager was adding last quarter: Electronic Arts Inc. (NASDAQ:EA). We’ve covered EA heavily in the past, and although the company operates in a secularly declining industry, it has managed to see its shares rise over 18% since the start of 2013.
Much of this appreciation has occurred since CEO John Riccitiello bought over 31,000 shares on February 1st, proving that insider trading activity is always a crucial indicator to track (see more evidence here). As we approach a new console cycle, there are more reasons for investors to be optimistic on EA’s outlook, and it’s important to recall that the company has the potential to go fully digital.
Loeb also took new positions in biotech companies Abbott Laboratories (NYSE:ABT) and AbbVie Inc (NYSE:ABBV), while upping his stake in Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA) by 85% from the previous quarter.
Why was this the case?
Generally speaking, sentiment on this particular segment of healthcare is mixed, though it’s interesting to note that each member of this trio has gained at least 4.5% year-to-date.
At a 4.4% yield, AbbVie pays the highest dividend in S&P 500’s entire healthcare sector, and Abbott offers a much more modest yield of 1.6%. Ariad, meanwhile, is not attractive for income-seeking investors, though Loeb has held the stock since the second quarter of last year. Wall Street’s average price target on Ariad represents an upside of more than 40%, though “monkeys” may be best off by considering all three of these biotech stocks in tandem.
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