Top 5 Stocks From This Niche Hedge Fund: SandRidge Energy Inc. (SD), Wyndham Worldwide Corporation (WYN) & More

TPG-Axon first launched in 2005 as a $2.8 billion joint venture between TPG (the private equity giant) and Dinakar Singh, a former top trader at Goldman Sachs. TPG-Axon now manages some $5.8 billion across both the public and private markets. For its publicly owned securities, the hedge fund is very concentrated, with around 40% of its portfolio invested in its top five stocks. As a result, the fund must have a lot of conviction in these top picks (check out all TPG’s stocks), so let’s check them out.

TPG-Axon’s top five

SandRidge (SD)SandRidge Energy Inc. (NYSE:SD). is now TPG’s number one stock holding after the fund increased its stake by 87% last quarter. The energy company now makes up 10.8% of the hedge fund. TPG-Axon has claimed that the company has underperformed due to strategic and management missteps. A recent “win” for the hedge fund includes its deal with the company to add four directors of their choosing to SandRidge Energy Inc. (NYSE:SD)’s board, who will then engage with an independent firm to review land deals by management.

The hedge fund believes SandRidge Energy Inc. (NYSE:SD) has a solid asset base, but the fundamental issue is management. TPG-Axon has also noted that it might be best is for an organization with a lower cost of capital to take over SandRidge’s asset base (read more about the SandRidge buyout).

Wyndham Worldwide Corporation (NYSE:WYN) is TPG’s second largest holding after the fund upped its stake in the company by 93%. The hotel stock posted fourth quarter results that beat consensus, while also upping its earnings guidance for 2013. The drag on the industry of late has been a slowdown in customer spending due to a sluggish economy, but this should turnaround as the economy strengthens, which in turn bodes well for Wyndham Worldwide Corporation (NYSE:WYN) (see how to best trade the lodging stocks in 2013).

The hotel stock also pays a 1.85% dividend yield. Although the dividend yield is modest, Wyndham Worldwide Corporation (NYSE:WYN) has showed commitment to returning cash to shareholders with its 26% dividend payment hike during the fourth quarter. What’s more is that its positive cash flow generating capabilities should make it possible for the company to up its dividend throughout the coming years. Management expects to generate upwards of $750 million in cash flow each year going forward versus the $700 million generated in 2012.