Each quarter, hedge funds, such as Jeffrey Vinik’s Vinik Asset Management, file 13F forms with the SEC. These 13F forms disclose many of the positions held in the fund’s equity portfolio during the quarter. Jeffrey Vinik was the manager of Fidelity’s Magellan Fund from 1992 to 1996, generating an average return of 17% per year. He launched his own hedge fund, Vinik Asset Management, after leaving Fidelity.
Early performance for the hedge fund was impressive, but Vinik recently announced he would be closing the fund due to disappointing performance. In spite of this, given his historical success, his equity holdings for the first quarter may be worth studying. We will now take a quick look at the five largest equity holdings disclosed in the fund’s recently filed 13F; learn the secrets of hedge fund piggybacking here.
Top dog
The largest equity holding disclosed in the 13F was in agricultural biotechnology company Monsanto Company (NYSE:MON), with the fund holding 954,400 shares worth approximately $100.8 million as of March 31, 2013, a substantial rise of 400,000 shares from the fund’s stake as of the end of the prior reporting period. Monsanto Company (NYSE:MON)’s price performance has been impressive over the past twelve months, with its price rallying from around $75 a year ago to $104.66 as of this writing, not far from its 52-week high.
The company recently won a Supreme Court case strengthening the ownership of its patents, and all anti-trust worries aside, there don’t look to be too many more regulatory fears on the near-term horizon. At 19.8 times forward earnings and 3.8 times sales, Monsanto Company (NYSE:MON) isn’t overly expensive, and its dominant +90% share of the soybean seed market isn’t likely to go away any time soon.
The best of the rest
Next up is homebuilder Lennar Corporation (NYSE:LEN), with the fund increasing its holding by 57% quarter-over-quarter to more than 2.2 million shares worth $93.6 million, as of March 31, 2013. This play may have been a bet on the continuing housing recovery, although so far official government statistics on monthly residential sales have been disappointing. Lennar Corporation (NYSE:LEN) certainly has had impressive price performance, gaining 50% in the past year and 150% in the past two years, to trade at $42.64 as of this writing. The stock has also benefitted from positive earnings surprises; an average beat of 46% for the past four quarters, with the most recent result beating expectations by 100%.
The third largest holding in terms of value is in gold miner Barrick Gold Corporation (USA) (NYSE:ABX), with the fund holding over million 3 shares worth over $88.8 million, and Vinik increasing his holding by 12% during the quarter.
This was an interesting move. Barrick Gold Corporation (USA) (NYSE:ABX) has been subject to much bad news of late, due to the widely-covered fall in aggregate gold prices, its troubled Pascua Lane mine project, its conflict with the Dominican Republic government over profits from the Pueblo Viejo mine, as well as the sale by the New Zealand Superannuation Fund of its Barrick holdings, citing concerns about the company’s business ethics. Price performance for the stock has also been disappointing, with Barrick currently trading at $19.51, not far from the 52-week low. Clearly, this is a turnaround bet on gold, but at the moment, it’s tough to see any bullish prospects in the near-term.
The next holding we will consider is in retailer Best Buy Co., Inc. (NYSE:BBY), with the fund holding 3,896,610 shares worth over $86 million, with Vinik selling nearly half of his holding during the quarter. Best Buy Co., Inc. (NYSE:BBY)’s earnings for its latest first quarter were disappointing, with the company reporting a net loss of $81 million, or $0.24 per share, compared to a profit of $0.46 per share in the corresponding period last year. Many analysts feel the impressive price action of the stock, currently trading at $26, not far from the 52-week high, is not justified by its fundamentals, and like Barrick Gold, this isn’t a very attractive play from Vinik.
Rounding out his top five is Starwood Hotels & Resorts Worldwide, Inc (NYSE:HOT), with the fund holding 1,271,000 shares worth approximately $81 million as of March 31, 2013, a substantial increase of 118% from the amount held at the end of the prior quarter. Starwood Hotels & Resorts Worldwide, Inc (NYSE:HOT) beat Mr. Market’s expectations in the first quarter, to tally revenue of $1.54 billion; analysts were expecting $1.47 billion for the quarter. Earnings per share were also $0.76, while analysts predicted EPS of just $0.53. Price action has been similarly impressive, with the stock currently trading near its 52-week high at $68.30. Overall, this is one of Vinik’s better picks.
Final thoughts
In spite of the impending closure of his fund, Jeffrey Vinik has had an impressive career as an investor, and therefore all five of these picks may be worth adding to your watchlist. Barrick Gold and Best Buy have had their troubles, but there’s at least an avenue toward recovery in both companies’ futures, no matter how dim. Starwood, Lennar Corporation (NYSE:LEN) and Monsanto Company (NYSE:MON) look like better bets on the whole, with the latter proving that it serves as an adequate No. 1 in any agriculture-focused investor’s portfolio; learn more about hedge funds’ strategies here.
Disclosure: none
