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General Electric Company (GE), Microsoft Corporation (MSFT): Blue Chips And Investment Trusts Among This Hedgie’s Top Picks

Our report on the activity of hedge funds continues with the 13F filing of Redmond Asset Management, LLC, founded by Scott Redmond, its Chief Financial Analyst and Lead Portfolio Manager. The fund has made additions to their top holdings, which include blue chips like General Electric Company (NYSE:GE) and Microsoft Corporation (NASDAQ:MSFT). Let us analyze how the 5 biggest positions of Redmond have done in 2013 and where they stand now. Feel free to have a look at what other hedge funds are doing and also make sure to check out our premium offers.

It’s important to track hedge fund sentiment because it has been found that for investors who know where to look, it’s possible to beat the market by 18 percentage points a year. Learn more here.

Let’s get started

Redmond Asset Management added exactly 10,000 shares to their stake in MELA Sciences Inc (NASDAQ:MELA), its top holding. The company designs and develops instruments used to detect melanoma. The stock has continued its downtrend that started in 2010 and has fallen 41% since the start of 2013.The financial results for the first quarter of 2013 show that it was the company’s best quarter in terms of revenue, yet it continues to bleed money, with Earnings Per Share (EPS) of $-0.17. A beta of -0.17 can explain the slide of the stock, in contrast to the slow recovery of the market after the credit crunch. Perhaps Redmond considers the stock to be at a turning point and expects it to turn profits soon.

General Electric Company (NYSE:GE)

The second largest position of Redmond Asset Management is General Electric Company (NYSE:GE). The stock of the US giant has started an up-trend in January and reached a 2013 high of $23.9 on March 8. The correction ended on April 22 and the stock price has been growing ever since. General Electric Company (NYSE:GE)’s stock is traded at a trailing Price to Earnings (PE) ratio of 16.80, while the forward P/E ratio is 12.46. This is a sign the market expects the company to increase its revenues and earnings. Eight of the 17 analysts monitoring the stock recommend it as a Buy and 4 of them rate it as a Strong Buy. They also expect earnings to continue growing in 2013 and 2014 and have set a price range of $22-$28 .

With a small addition of 300 shares, Monmouth Real Estate Investment Corp. (NYSE:MNR) occupies the third place among Redmond’s biggest positions. On April 9, Monmouth R.E. Inv. Corp. (NYSE:MNR) announced the introduction of a dividend of $0.15 per share payable June 17, 2013. The stock has a beta of 0.65 and a Levered Free Cash Flow of $18 million. Only one of three analysts recommend the stock as a buy. Although they expect the revenue to grow in 2014, they believe the EPS to decrease slightly. The investment trust is traded at a trailing P/E ratio of 35.15 while the forward P/E is 53.25.

Another position to with Scott Redmond added since the start of 2013 is Microsoft Corporation (NASDAQ:MSFT). With Windows 8 failing to win the hearts of PC users, Microsoft Corporation (NASDAQ:MSFT)’s hopes lie in a new game console, the Xbox 720, which is expected to be released by the end of 2013. Furthermore, Microsoft has stepped up their efforts to gain more of the smartphone market share by helping their partners – Nokia Corporation (ADR) (NYSE:NOK) – to promote the new, cheaper Lumia 521. Microsoft pays a dividend of $0.86 and has a beta of 1.18, which puts it among reasonably safe bets. Eighteen of the 38 analysts monitoring the stock recommend it as a Buy or Strong Buy and have set a price range of $27-$39.

The best of the rest

The fifth largest position of Redmond Asset Management is CapitalSource, Inc. (NYSE:CSE). Redmond has actually decreased the fund’s exposure to the Los Angeles, CA based credit provider, but only by 1,000 shares. The stock of CapitalSource, Inc.(NYSE:CSE) has continued to grow in 2013, reaching a high of $9.86 in March. It has recently faced downgrades from Barclays PLC (ADR) (NYSE:BCS) and other firms, while JPMorgan Chase & Co. (NYSE:JPM) has upgraded it to Market Outperform. CapitalSource stock has a beta of 0.93 and pays a dividend of $0.54. Is is traded at a trailing P/E ratio of 4.29 while the forward P/E is of 12.87. The analysts estimate earnings to fall in 2013 but grow again in 2014 and revenues to grow in both years. The price range is set at $7.5-$11.

Bottom line

Redmond Asset Management have increased their exposure to stocks of blue chips in a move to balance their 13F equity portfolio. They have also made a significant addition to their top holding – MELA Sciences Inc (NASDAQ:MELA) – which signals their belief the company will turn a profit in the near future.

Disclosure: none

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