At Insider Monkey, we track 450 of the world’s most elite hedge funds, because as our research shows, the best equity holdings of the most talented money managers have had market-beating potential in the past. Our small-cap strategy beat the broader indices by 18% a year for more than a decade in our back tests, and since sharing these picks with the public, they’ve beaten the S&P 500 by more than 20% (learn how to use this market-beating strategy yourself).
In our fund-by-fund analysis system, we’ve given readers the ability to cruise through any of the equity portfolios we track, from Warren Buffett to David Einhorn. One particular money manager that flies under the mainstream media’s radar is Christopher Lord’s Criterion Capital. With over half of his $1.8 billion equity portfolio allocated to the technology sector, it’s no secret which markets Lord and his investment team focus on, but it’s still worth taking a look at his top five stock picks.
Interestingly, each member of this “fab five” saw Lord up his stake at the end of the fourth quarter. Sitting at No. 1 is Motorola Solutions Inc (NYSE:MSI), as it has for four consecutive quarters. The hedgie increased the size of his Motorola position by 17% in Q4, and aggregate hedge fund interest remained flat over this period. Thirty-five of the funds we track are bullish on Motorola, including Jeffrey Ubben, George Soros and Leon Cooperman (see Cooperman’s full equity portfolio), in addition to Lord. Since the start of 2013, Mr. Market has rewarded Lord’s bullishness, pushing Motorola up more than 13%, and in addition to this appreciation, shares sport a solid dividend yield of 1.6%.
Google Inc (NASDAQ:GOOG), meanwhile, sits at No. 2 in Lord and Criterion Capital’s equity portfolio, as the hedgie upped his stake by 35% last quarter. Like Motorola, shares of the tech giant have generated handsome returns year-to-date, popping 18.5%. On the whole, Google Inc (NASDAQ:GOOG) is the smart money’s third favorite stock pick, behind Apple and AIG. Heading into 2013, 126 of the funds we track were bullish on Google, including Rob Citrone and David Einhorn (check out Einhorn and Greenlight’s profile), who each established new positions.
Now trading solidly above the key psychological level of $800 per share, Google Inc (NASDAQ:GOOG)’s stock price is nearly at par with most analyst estimates, but shares still aren’t particularly expensive at 15.7 times forward earnings and a PEG of 1.8. The sell-side’s EPS growth forecast, which predicts annual bottom line expansion of 14-15% a year through at least 2017, is significantly above key peer Microsoft by about six percentage points. It’s easy to see why Lord is bullish.
Priceline.com Inc (NASDAQ:PCLN) is the hedge fund manager’s third largest equity holding, after he upped his stake by 27% in Q4. Other hedgies increasing their stakes in this online travel giant last quarter include Steven Cohen, Louis Bacon and Cliff Asness, the manager of AQR Capital Management. Generally speaking, Wall Street’s average price target on Priceline.com Inc (NASDAQ:PCLN) indicates that an upside of 13-14% is expected from current levels, and a solid return in 2013 (+15.8%) has already made mimicking Lord quite profitable.
What about the industry at large?