Google Inc (GOOG), Analog Devices, Inc. (ADI): Cantillon Capital Management’s Top Picks for Q3

In mid July, Cantillon Capital Management, an asset management firm run by William Von Mueffling and his team, filed their 13F for the second quarter of 2012. These filings disclose many of a fund’s long equity positions in U.S. stocks as of the end of the quarter (so this one covers Cantillon’s holdings from the end of June) and we believe that they can be useful sources of information for investors.

For one, we’ve found that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year and we think that more strategies are possible as well. We can also go through individual filings in search of intriguing investment ideas, which can be researched further. Read on for our quick take on Cantillon’s five largest positions from the beginning of this month, see the full filing on the SEC’s website, or compare these picks to those in previous filings.

Number one

There was little change in Cantillon’s holdings of Google Inc (NASDAQ:GOOG), during Q2, as the fund closed June with about 410,000 shares in its portfolio. Google Inc (NASDAQ:GOOG) is valued at 17 times forward earnings estimates, as Wall Street analysts expect the company to continue growing its earnings as the Motorola Mobility acquisition continues to be integrated and the advertising operations continue to be a star business. Google Inc (NASDAQ:GOOG) did grow its net income by 16% in its last quarterly report compared to the first quarter of 2012, and we’d be interested in looking at it as a potential growth stock.

The best of the rest

Von Mueffling and his team reported owning 6.7 million shares of Analog Devices, Inc. (NASDAQ:ADI) at the end of the quarter. Recent reports have shown little change in the company’s financials relative to a year ago, yet markets like the $15 billion market cap semiconductor company enough that they have bid up its valuation to trailing and forward P/Es of 23 and 19 respectively. While that is a bit pricy, we’d note that Analog Devices, Inc. (NASDAQ:ADI) does have a sizable cash hoard with over $4 billion in cash on its balance sheet, and a current dividend yield of almost 3%.