In May, Joel Greenblatt- the former manager of Gotham Capital, who many investors might recognize as the author of You Can Be A Stock Market Genius– filed his 13F for the first quarter of 2013 with the SEC, disclosing many of his long equity holdings as of the end of March (see Greenblatt’s stock picks). We like to use 13Fs both as a source of information for investment strategies (we have found, for example, that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year) and as a source of initial investment ideas. We screen top managers’ filings according to a number of criteria, including dividend stocks, so that investors can do further research on any interesting names. Read on for our quick take on Greenblatt’s five largest holdings as of the end of March with dividend yields of more than 3% at current prices and dividend levels.
The value investor initiated a position of about 440,000 shares in Seagate Technology PLC (NYSE:STX). The hard disk drive company experienced a 21% decline in revenue in its most recent quarter (which ended in March) compared to the same period in the previous fiscal year, with earnings down over 60%. The dividend yield is 3.6%, and if Seagate Technology PLC (NYSE:STX) could stabilize its business it could be a value play given its low earnings multiples. Billionaire David Einhorn’s Greenlight Capital reported owning 5.4 million shares of Seagate in its own 13F filing (check out which other stocks Einhorn reported owning).
Greenblatt slightly increased his holdings of SAIC, Inc. (NYSE:SAI), a $4.6 billion market cap security and intelligence company, to a total of 1.2 million shares. SAIC, Inc. (NYSE:SAI) is currently planning to break up into two companies, one of which would focus on serving government customers and one of which would handle other opportunities. In Greenblatt’s book he mentioned spinouts and breakups as potential sources of value (read more about investing in spinouts). Recent quarterly dividend payments have been 12 cents per share, making for a yield of 3.7%, though we would be concerned about the potential effects of lower U.S. government spending.
According to the 13F, Greenblatt trimmed his stake in Raytheon Company (NYSE:RTN) but still owned about 270,000 shares at the beginning of April. The financial community is expecting the aerospace and defense company to be hit hard by spending reductions, and both the trailing and forward P/E are 12. With a yield of 3.3% and a beta of 0.6, however, Raytheon Company (NYSE:RTN) may serve as a potential pick for defensive investors. Earnings seem to be holding up all right so far as well. Winton Capital Management, managed by billionaire David Harding, owned about 720,000 shares at the end of Q1 (research more stocks Winton owns).
The filing disclosed ownership of 2.1 million shares of PDL BioPharma Inc. (NASDAQ:PDLI) at the end of the first quarter of 2013. PDL BioPharma Inc. (NASDAQ:PDLI) is a $1.1 billion market cap owner of patents and other intellectual property in the biotechnology and healthcare space. Markets are not very excited about the company- its earnings multiples are low- and at current prices and dividend levels it pays an annual yield of over 7%. We’d have to consider the business’s future carefully before making a decision, however. Renaissance Technologies, whose founder Jim Simons is now a billionaire, reported a position of over 12 million shares (find Renaissance’s favorite stocks).
Lorillard Inc. (NYSE:LO) rounds out our list of Greenblatt’s dividend stock picks- the value investor increased his holdings by over 300%, to a total of more than 310,000 shares. The cigarette company carries trailing and forward P/Es of 14 and 13, respectively, a discount to many of its peers. Like many cigarette companies, Lorillard Inc. (NYSE:LO) pays a high yield (5%) and has little exposure to the overall economy (at a beta of 0.3). With the most recent quarterly report showing improvement in both revenue and earnings compared to the first quarter of 2012, we think that the company is worth considering.
Disclosure: I own no shares of any stocks mentioned in this article.