Initially seeded by legendary Tiger Management, Hound Partners got its start in 2004 with Jonathan Auerbach and Scott McLellan at its helm. Both men had illustrious backgrounds as analysts, but it was Mr. Auerbach who kept this long/short equity fund alive when McLellan split off to form Marble Arch Partners in 2007. With close to a billion dollars in assets under management, Hound Partners is known to pile big money into its largest convictions, and the following five stocks go far to prove that point:
First up is W. R. Grace & Co. (NYSE:GRA), a specialty chemicals and materials manufacturer with a global presence. Hound saw a 10% drop in their position from Q2 2012 to Q3 2012 but remains heavily invested with over $100mm employed. Ex-partner Scott McLellan has staked a similar view with his Marble Arch Investments Fund (compare his top five holdings here). Both revenue and earnings growth this past quarter were in the red compared to the same quarter last year, and with the highest PEG amongst the list (2.84), the stock price may see a correction in 2013, especially after such a strong push in the second-half of 2012. Long-term prospects are promising, but we advise waiting to jump in only on significant dips.
The software titan Google (NASDAQ:GOOG) is next on the list, and it is no stranger on many hedge funds’ rosters. A venerable Who’s Who of fund managers have struck their claim in Google, including billionaires Ken Fisher and Ken Griffin. (See which other multi-billion dollar funds have a GOOG play here.) With continued heavy buy ratings from analysts all over the Street, Google is expected to keep up their abnormally high EPS of 32, and we expect the stock to break $800 within the next year. Thirty-three analysts weighed in to give GOOG that one-year price target, delivering 12% of upside if those expectations materialize.
Continue reading to see the rest of the list.