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
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).
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.
was one of TPG’s biggest increases, at 190% last quarter, and now makes up the fund’s third largest holding. GNC is the specialty retailer of nutritional products including vitamins and supplements. Soft employment and weak consumer spending have previously put pressure on the industry, but a rebounding economy should help lift the stock. S&P estimates that total consumer spending will advance 2.5% in 2013, up from the 1.9% in 2012.
TPG-Axon has taken an activist role in battling SandRidge Energy Inc. (NYSE:SD) to rearrange management and hopefully unlock value for shareholders. TPG-Axon has the support of a few heavy hitters in the hedge fund industry backing them, including billionaire Leon Copperman, who bought up 24 million shares during the fourth quarter, and Fairfax Financial now owns 32 million after upping their stake 650% in 4Q. Other big bets hinge on a rebounding economy and consumer spending, including Wyndham Worldwide Corporation (NYSE:WYN) and GNC. However, TPG-Axon’s bet on Dollar General should perform well despite the economic backdrop. Also, its investment in Spirit will hopefully pay out with higher dividends in the near future.
The article Top 5 Stocks From This Niche Hedge Fund originally appeared on Fool.com and is written by Marshall Hargrave.
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