We have gone through Citadel’s most recent 13F compared to the previous one (see a history of Citadel’s stock picks) and here’s what we noticed:
Biotech bets. The first thing to know about Citadel and Ken Griffin is that they typically employ a high level of portfolio turnover on a quarterly basis. Still, it’s worth tracking the moves they make, and a couple of the biggest new stakes they took last quarter were in Isis Pharma (NASDAQ:ISIS) and Elan Corporation, plc (ADR) (NYSE:ELN). Isis is a small-cap therapeutics company that seeks to develop RNA-based drugs, while Elan is larger, and has its fingers in drugs that treat autoimmune and neurodegenerative diseases. Both are absolutely booming year-to-date, with Elan up 75% and Isis up 200%, but judging by Citadel’s history of growth-related stock picks, we’re not surprised. Both biotech players are fairly valued and analysts expect the growth to continue; if 2014 is a good year for healthcare, Griffin may be well-positioned here.
Non-cyclical consumer goods. In the non-cyclicals, meanwhile, Griffin and Citadel were boosting their stakes in Safeway Inc. (NYSE:SWY) and Philip Morris International Inc. (NYSE:PM). Like most of the hedge fund’s other buys, both stocks currently have market sentiment on their side. Safeway is currently in the process of exploring a sale of its U.S. business, with most estimates placing a fair deal value between $40 and $45 a share (it currently trades near $34).
Philip Morris, on the other hand, is a more traditional bet on a tobacco industry that is set to gain from emerging markets in the future. Philip Morris in particular has an enormous potential to expand in Asian countries like China and India, perhaps even more so than most of its closest competitors. With gross margins up by about 1 percentage point since 2009 on the back of a fairly large cost-cutting program, profitability is also healthier than it’s been in a decade.
Large-cap growth. Interestingly, Griffin and Citadel were cutting their positions in large-cap growth companies like Apple Inc. (NASDAQ:AAPL) and Priceline.com Inc (NASDAQ:PCLN). The latter has had a better 2013 than Apple and now trades above the $1,000 mark, but valuation concerns persist. Apple, meanwhile, is still a growth company by our standards, and it’s somewhat curious Griffin trimmed his stake by 45% here. We’ll be watching closely next quarter.
A couple notable sales. Lastly, the billionaire also sold out of Hertz Global Holdings, Inc. (NYSE:HTZ) and AutoZone, Inc. (NYSE:AZO) entirely, and both the car rental giant and the auto servicer have been kind to him. The valuation isn’t scary at either stock, and long-term growth prospects are still their, but both have outperformed the market of late, so it’s possible Griffin decided to cash in his gains while the getting was good, for lack of a better phrase.