Farallon Capital, led by Thomas Steyer, recently filed its latest 13F with the Securities and Exchange Commission, revealing an equity portfolio worth $7.6 billion at the end of the third quarter. According to the filing, Farallon Capital acquired stakes in over 20 companies, while reducing its holdings in ten stocks. Furthermore, the investor unloaded its entire stake in more than 35 companies, including Hospira Inc. (NYSE:HSP), during the difficult quarter for investors. Founded by Thomas Steyer in 1986, Farallon Capital is one of over 700 hedge funds tracked by Insider Monkey. The fund makes investments in economies around the world, including both developed and emerging markets, and public and private debt. Mr. Steyer uses a variety of strategies, include credit investments, value investments, event-driven investments, merger arbitrage, real estate investments, and direct investments, employing them on an opportunistic basis. In this article, we will be taking a closer look at Farallon Capital’s top stocks for the third quarter, starting with search engine giant Google’s parent company.
Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by more than 53 percentage points since the end of August 2012. These stocks returned a cumulative of 102% vs. a 48.7% gain for the S&P 500 Index (see more details here). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).
#5 Alphabet Inc (NASDAQ:GOOG)
– Shares held (as of September 30): 386,000
– Total Value (as of September 30): $234.85 million
Farallon Capital increased its position in Alphabet Inc (NASDAQ:GOOG) by 116% during the quarter, which shows its confidence in the stock, which has increased by 27.17% since September 30, and 43.73% year-to-date. Alphabet Inc (NASDAQ:GOOG) is making a bigger move into cloud-computing, as the company recently hired Diane Greene, former boss and co-founder of VMware, Inc. (NYSE:VMW), to lead its cloud-computing business. This indicates that the company is getting serious about cloud-computing, where it will face tough competition from big players Amazon.com, Inc. (NASDAQ:AMZN) and Microsoft Corporation (NASDAQ:MSFT). Google CEO Sundar Pichai said in a blog post that “this is an important and fast-growing area for Google and we’re investing for the future.” Another investor betting big on Alphabet Inc (NASDAQ:GOOG) is Andreas Halvorsen’s Viking Global, which held 2.53 million shares as of the end of the third quarter.
#4 Allergan PLC (NYSE:AGN)
– Shares held (as of September 30): 894,411
– Total Value (as of September 30): $243.11 million
Farallon Capital cut its stake in Allergan PLC (NYSE:AGN) by 24,873 shares during the quarter. Shares of Allergan’s stock surged by 3.68% on Friday on rumors that Allergan and Pfizer Inc. (NYSE:PFE) are going to enter into a merger agreement on Monday. Some unnamed people told Bloomberg that Pfizer can make a bid of $370-to-$380 for each share of Allergan in a deal valued at around $150 billion. The merger will allow New York-based Pfizer to move its headquarters to Ireland, where Allergan is registered. This move would allow Pfizer to save billions of dollars in taxes. Year-to-date Allergan PLC (NYSE:AGN)’s shares have increased by 21.53%. Billionaire activist investor Dan Loeb of Third Point was holding 3.67 million shares of Allergan as of the end of the third quarter.
We will be analyzing Farallon Capital’s top three stocks on the next page.
#3 Sigma-Aldrich Corporation (NASDAQ:SIAL)
– Shares held (as of September 30): 2.00 million
– Total Value (as of September 30): $278.23 million
Farallon Capital upped its stake in Sigma-Aldrich Corporation (NASDAQ:SIAL) by 10,800 shares during the quarter. Sigma-Aldrich is a chemical, life science, and biotechnology company, which was acquired by Merck & Co., Inc. (NYSE:MRK) in a $17 billion deal or $140 cash per share earlier this year. The companies recently received the final approval from the European Commission (EC) for the acquisition, which was announced in September of last year. The company was delisted on November 17 as the merger was completed. Renaissance Technologies, led by Jim Simons, held 2.37 million shares of the company as of the end of September.
#2 Broadcom Corporation (NASDAQ:BRCM)
– Shares held (as of September 30): 6.92 million
– Total Value (as of September 30): $355.82 million
During the third quarter, Farallon Capital increased its stake in Broadcom Corporation (NASDAQ:BRCM) by around 1.30 million shares. Broadcom Corporation (NASDAQ:BRCM) is engaged in providing semiconductor solutions for wired and wireless communications. The strong third quarter results seem to have had a positive effect on the company’s stock, which is trading up by 23.54% year-to-date. The company posted income of $429 million compared to $98 million for the same year-ago quarter. However, its revenue fell by 3.2% to $2.19 billion. Broadcom Corporation (NASDAQ:BRCM) is another favorite stock of Viking Global, which owned 57 million shares of the company as of the end of September.
#1 Time Warner Cable Inc (NYSE:TWC)
– Shares held (as of September 30): 3.38 million
– Total Value (as of September 30): $606.09 million
Time Warner Cable Inc (NYSE:TWC) is represented as Farallon Capital’s top holding, with the fund boosting its position by 1.16 million shares during the quarter. A total of 107 hedge funds tracked by Insider Monkey were holding Time Warner Cable Inc (NYSE:TWC) in their portfolios at the end of September, compared to 105 at the end of the second quarter, while the value of their collective positions rose to $16.2 billion, compared to $14.4 billion at the end of June. Time Warner Cable reported third quarter revenue of $4.74 billion, up by 3.6% year-over-year. Its profit, however, fell to $437 million, versus $499 million a year ago. Time Warner Cable Inc (NYSE:TWC)’s stock performance has been strong, with the stock trading up by 21.33% year-to-date. John Paulson’s Paulson & Co held 8.12 million shares of the company as of the end of the third quarter.