Richard Chilton‘s Chilton Investment Company, LLC is a hedge fund founded in 1992 by former Alliance Capital, Merrill Lynch, and Allen & Company employee, Richard Lockwood Chilton Jr. Launched as a long-short fund, the fund has evolved to employ aggressive capital appreciation strategies in its investments, which include both public equity and fixed income markets. In 2011 the fund had $7.5 billion in assets under management, though this has since shrunk to around $3 billion. As of the end of 2014, the fund disclosed an equity portfolio valued at $2.87 billion that contains over 170 positions, mainly represented by Services Stocks. According to the latest 13F filing, Chilton’s top picks include W.R. Grace & Co. (NYSE:GRA), Sherwin-Williams Co. (NYSE:SHW), Union Pacific Corporation (NYSE:UNP), Covidien plc (NYSE:COV) and Actavis plc (NYSE:ACT).
We track hedge funds and billionaire investors because our research has shown that a portfolio that consists of the most popular small-cap stocks among these investors outperformed the S&P 500 Total Return Index by almost one percentage point per month between 1999 and 2012 in our backtests, while their 50 top picks (mostly represented by large-cap companies), underperformed the Index by around 7 basis points. We have been sharing the list of the 15 most popular small-cap stocks among hedge funds in real time since the end of August 2012. This strategy has returned around 132% since then, in comparison to a gain of only 57% for the S&P 500 ETF (SPY) during the same period (read the details here).
According to the fund’s latest 13F filing, Chilton decreased its position in the chemical specialty company W.R. Grace & Co. (NYSE:GRA) by 9% on the quarter, but the position remains the fund’s largest, constituting 6.20% of its equity portfolio. The investor owns 1.87 million shares of the company, valued at $177.95 million. Moreover, W.R. Grace’s popularity among hedge funds is something that is worth noticing, because in the latest round of 13F filings, a total of 42 investors reported holding around $3.14 billion worth of W.R. Grace & Co. (NYSE:GRA)’s stock (more than 40% of the company’s shares). At the end of December last year, Iridian Asset Management held 5.35 million shares of the company, followed by billionaires John Griffin and Stephen Mandel, as W.R. Grace & Co. (NYSE:GRA)’s three largest shareholders among the funds that we track.
The Columbia-based chemical giant is planning to split into two companies, one of which will be engaged in the catalysts technologies and materials technologies sectors, and with annual sales of $1.8 billion, with the other one holding the construction and packaging businesses of the company, with $1.5 billion in sales per year.
The second largest holding of Chilton is represented by paint and coating manufacturer Sherwin-Williams Co. (NYSE:SHW), the stake containing 411,800 shares, valued at $108.32 million (3.77% of the portfolio). Earlier this month, Sherwin-Williams Co. (NYSE:SHW)’ senior vice president Allen J. Mistysyn sold 11,046 shares at an average price of $285.12 per unit. Following the transaction that involved initially an acquisition of some 9,200 shares via employee stock options, Mr. Mistysyn owns 16,284 shares. Chilton is the second-largest shareholder of Sherwin-Williams Co. (NYSE:SHW), trailing Robert Joseph Caruso’s Select Equity Group, which owns 1.33 million shares.
Richard Chilton’s stake in Union Pacific Corporation (NYSE:UNP) remained basically unchanged during the fourth quarter at some 775,700 shares worth $92.41 million. Union Pacific Corporation (NYSE:UNP) is a logistics company that owns multiple transport companies, including the Union Pacific Railroad Company, which links 23 states in the western 66% of the U.S. The company’s stock advanced by 20% over the last 52 weeks, underperforming the railroads industry, which appreciated by 31% during the same period. Another shareholder of Union Pacific Corporation (NYSE:UNP) is Jean-Marie Eveillard‘s First Eagle Investment Management, which initiated a stake with 1.20 million shares during the last three months of 2014.
Covidien plc (NYSE:COV) was the fund’s fourth largest position as of the end of 2014, after the holding was increased by 200% to 601,700 shares. However, at the end of January, Medtronic PLC (NYSE:MDT) completed the acquisition of Covidien in a $42.9 billion deal. Next in line is another healthcare stock, Actavis plc (NYSE:ACT), whose stake constituted 3.09% of Chilton’s portfolio. The investor holds some 344,900 shares of the $80 billion drug manufacturing company, which were valued at $88.78 million as of the end of 2014. In its latest financial results Actavis plc (NYSE:ACT) posted earnings per share (EPS) of $3.91 for the fourth quarter, beating the estimates of $3.67 per share, on revenue of $4.01 billion. The company is expected to post an EPS of $17.59 for the current year. Moreover, Actavis recently completed the acquisition of Allergan in one of the most closely-watched deals from the healthcare sector in 2014. Actavis plc (NYSE:ACT) has always been one of the favorite healthcare stocks among hedge funds, ranking on the third spot among hedge funds’ most popular stock picks from the latest round of 13F filings.
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