Hedge funds and other major investors are required to file 13Fs with the SEC several weeks after the end of each quarter, disclosing many of their long equity positions. Even with the inherent delay there are a number of ways for investors to benefit from this information. For example, we work on using filings to develop investment strategies and have found that the most popular small cap stocks among hedge funds tend to outperform the market by an average of 18 percentage points (read more about our findings on small cap stocks). We also analyze filings from notable investors including hedge fund managers to see what their “recommendations” would be, so that readers can perform additional research on interesting stocks. John Griffin, formerly billionaire Julian Robertson’s right-hand man at Tiger Management, now runs Blue Ridge Capital. Read on for Blue Ridge’s top five picks from the end of December and see the full list of stocks from the 13F.
Griffin’s top pick was Google Inc (NASDAQ:GOOG), with Blue Ridge’s position increasing by 5% to almost 550,000 shares. 126 funds in our database reported a position in Google Inc (NASDAQ:GOOG), which made the company the third most popular stock among hedge funds (find more of hedge funds’ favorite stocks). Google Inc (NASDAQ:GOOG) reported a 7% increase in earnings last quarter compared to the fourth quarter of 2011, and the company has good growth prospects both from its search business and from the continued integration of Motorola Mobility Holdings. It trades at 15 times forward earnings estimates.
Blue Ridge reported ownership of over 10 million shares of American International Group Inc (NYSE:AIG), which had grabbed the #1 spot in our most popular list away from Apple Inc. (NASDAQ:AAPL). AIG’s price-to-book multiple is 0.7, and we think that the stock has at least some upside remaining even though we wouldn’t expect it to trade at book value and it has risen almost 30% in the last year. Billionaire Dan Loeb’s Third Point cut its stake in AIG between October and December but still had over 18 million shares in its portfolio at the beginning of 2013 (research more stocks Third Point owned).
Griffin and a number of other Tiger Cubs liked this travel stock:
The first rule of being a Tiger Cub is that you have to own Priceline.com Inc (NASDAQ:PCLN): at about 550,000 shares, Blue Ridge joined fellow Robertson disciples Lone Pine Capital, Coatue Management, and Tiger Global as the four largest equity holders of the travel website in our database of 13F filings. Earnings were up 26% in its most recent quarter compared to the same period in the previous year, primarily driven by higher sales. The stock rose following the report and is now valued at 16 times consensus earnings for 2013. This is based on expectations of high growth, so we wouldn’t take it at face value, but Priceline certainly could be a growth stock.
Thermo Fisher Scientific Inc. (NYSE:TMO), the $27 billion market cap medical instruments company, was another of Griffin’s favorite stocks in the fourth quarter. His fund owned just over 5 million shares. Net income has been up here as well, but that growth has been primarily due to improvements in margins which may be less sustainable. With a trailing P/E of 23, but high earnings growth expectations, we are not particularly excited about the stock but it might be good to watch how next quarter turns out. Glenview Capital, managed by Larry Robbins, is another major holder of the stock.
The fund increased its holdings of Gilead Sciences, Inc. (NASDAQ:GILD), a $65 billion market cap biotechnology company, to a total of 4 million shares. Adage Capital Management, managed by Phil Gross and Robert Atchinson, was also buying and had about 3 million shares in its own portfolio (check out Adage’s stock picks). Gilead is another stock whose valuation has already priced in substantial growth, with trailing and forward earnings multiples of 26 and 16 respectively. Revenue and earnings did grow at double-digit rates in the fourth quarter versus a year earlier.
Disclosure: I own no shares of any stocks mentioned in this article.