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Giovine Capital Loves These Five Stocks; Should You?

Thomas Giovine founded Giovine Capital in 1988. Due to good stock picking and solid risk controls, the fund, which has a long-term horizon and low-turnover rate, has grown to have an equity equity portfolio worth around $130.4 million as of the end of September. In this article we will focus on Giovine’s top stock picks of Walgreens Boots Alliance Inc (NASDAQ:WBA), Lockheed Martin Corporation (NYSE:LMT), Home Depot Inc (NYSE:HD), Apple Inc. (NASDAQ:AAPL) and Martin Marietta Materials, Inc. (NYSE:MLM).

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Ellica /

Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by 52 percentage points since the end of August 2012. These stocks returned a cumulative of 102% vs. 48.6% gain for the S&P 500 Index (see the details here). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).

Thomas A. Giovine
Thomas A. Giovine
Giovine Capital

#5 Apple Inc. (NASDAQ:AAPL)

Shares held (as of September 30): 47,250
Total Value (as of September 30): $5.21 million
Percent of Portfolio (as of September 30): 4.00%

Apple Inc. (NASDAQ: AAPL) reported blowout profits yet again for its fourth quarter, earning $1.96 per share on revenues $51.5 billion, beating estimates by $0.08 per share and $380 million, respectively. Revenue rose by 22.3% year-over-year, while gross margin was a healthy 39.9%. The stable gross margins show that Apple’s ecosystem moat is pretty wide. Although Apple’s gargantuan size limits the number of catalysts that can move the stock up higher, sentiment is trending up as Apple’s fellow tech giants have seen their shares surge in recent weeks. Apple also continues to spend tens of billions of dollars on buybacks every quarter, a move that should generate additional growth in EPS. Billionaire Ken Fisher’s Fisher Asset Management also reported ownership of 11.12 million shares of Apple heading into the fourth quarter.

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#4 Home Depot Inc (NYSE:HD)

Shares held (as of September 30): 45,225
Total Value (as of September 30): $5.22 million
Percent of Portfolio (as of September 30): 4.00%

With the U.S unemployment rate recently falling to 5%, more consumers will have credit to renovate their existing homes, which will mean more demand for home improvement chains such as Home Depot Inc (NYSE:HD). Given the strong housing market, look for Home Depot’s same store sales to remain robust. Shares are up 21.89% year-to-date, but could rally further as the U.S. economy strengthens and EPS rises due to big buybacks. Shares trade at a reasonable 20.57 times forward earnings given Home Depot’s strong growth prospects.

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