Each quarter, hedge funds, such as Crispin Odey’s Odey Asset Management Group, file 13Fs with the SEC. These 13F forms disclose many of the positions held in the funds’ equity portfolios during the quarter. Odey Asset Management, managed by Crispin Odey, is a London-based hedge fund with $6.2 billion in assets under management.
Originally founded in 1991, Odey’s fund has had its fair share of ups and downs over the years, with an unequivocal high point coming in 2008, when bearish bets on European banks allowed the manager to generate a 54.8% return in that year. One of Odey’s original backers was George Soros.
Let’s take a look at Odey’s top five stock picks from last quarter; discover how hedge fund piggybacking can beat the market.
Number one
The largest position in the Odey fund is in Delta Air Lines, Inc. (NYSE:DAL), with the fund holding 13,546,145 shares worth $223,646,857 as of March 31, 2013. This holding comprises 7.74% of the fund’s disclosed equity portfolio, and is a new position for the fund, initiated this quarter. Delta Air Lines, Inc. (NYSE:DAL) has won praise for its disciplined capital spending, via a policy of buying and refurbishing used aircraft rather than expensive new aircraft, as well as its capital returns, paying dividends back to shareholders. Some consider it to be the new airline industry leader, taking the crown from Southwest Airlines Co. (NYSE:LUV). Delta Air Lines, Inc. (NYSE:DAL) currently trades at $18.49, very close to its 52-week high.
The best of the rest
Next up is luxury goods retailer Signet Jewelers Ltd. (NYSE:SIG), with the fund reporting holdings of 2,533,439 shares worth over $169 million as of March 31, 2013, a rise of 4% from the end of 2012. The position may be a vote of confidence in the recent acquisition of Ultra Stores for $57 million in November 2012, broadening the company’s customer base. Earnings have certainly been impressive of late; for the quarter ended February 2, Signet Jewelers Ltd. (NYSE:SIG) reported a profit of $171.8 million, or $2.12 a share, compared with $156.6 million, or $1.79 a share, in the corresponding quarter of the prior year. As of this writing, Signet Jewelers Ltd. (NYSE:SIG) trades at $70.68, very close to its 52-week high.
The third largest stake for the fund is financial services and banking giant Wells Fargo & Co (NYSE:WFC), with the fund holding about 4.3 million shares worth over $159.5 million at the end of March, a rise of 27% from the end of the prior quarter. The increase in exposure may be influenced by the fund’s increasing bullishness on the financial sector due to an improving US economy, via rising consumer sentiment, “hopes” of falling unemployment and other measures. It is also notable that Warren Buffett of Berkshire Hathaway Inc. (NYSE:BRK.B) has increased his holding in the bank. Wells Fargo & Co (NYSE:WFC) is currently trading near $40, very close to its 52-week high.
Next up is homebuilder PulteGroup, Inc. (NYSE:PHM), with the fund holding about 7.4 million shares worth over $150 million, a rise in stake by 11% when compared with the end of the prior quarter. This play may be a bet on the continuing housing recovery, although so far official government statistics on monthly residential sales have been disappointing. However, PulteGroup, Inc. (NYSE:PHM), along with other homebuilders, has reported impressive results ‘on the ground.’ For first quarter 2013, PulteGroup, Inc. (NYSE:PHM) reported net income of $82 million, or $0.21 per share, compared with a net loss of $12 million, or ($0.03) per share, in the prior year, with home sale revenues increasing 35% to $1.1 billion, compared with $814 million in the prior year.
Rounding out our top five is Tesoro Corporation (NYSE:TSO), with the fund holding 2,247,416 shares worth approximately $131.6 million as of March 31, 2013, a big rise of over 1.5 million shares, or 223%, from the end of the prior quarter. Odey’s bullishness on Tesoro Corporation (NYSE:TSO) is shared by others; Barclays, for example, recently set a price target of $120 a share on the company, nearly double its current levels, primarily driven by the company’s acquisition of refinery assets in Canada, which originally belonged to BP plc (ADR) (NYSE:BP). Price action has also been strong, with Tesoro more than doubling over the past year to currently trade near the $62 mark.
Final thoughts
Crispin Odey is a large and very influential investor, and he has had some very successful years. The fund manager’s investments in Tesoro, PulteGroup, Inc. (NYSE:PHM), Wells Fargo & Co (NYSE:WFC), Signet Jewelers Ltd. (NYSE:SIG) and Delta Air Lines, Inc. (NYSE:DAL) are therefore worth watching for active investors. Continue preparing for 13F-filing season here.
Disclosure: none
