Williams Companies Inc. (WMB), Priceline Group Inc (PCLN), Costco Wholesale Corporation (COST): Morgan Stanley (MS)’s PDT Partners’ Top Picks

PDT Partners is a hedge fund manager that was spun out of Morgan Stanley (NYSE:MS)’s proprietary trading division last year. It is managed by quant expert Peter Muller, and holds a highly diversified equity portfolio worth more than $3.7 billion –down from $4.1 in the previous quarter. In this article, we will take a look at its top positions, Williams Companies Inc. (NYSE:WMB), Costco Wholesale Corporation (NASDAQ:COST), and Priceline Group Inc (NASDAQ:PCLN), in order to elucidate if any of them deserve further research.

The fund’s largest bet for the second quarter was placed on Williams Companies Inc. (NYSE:WMB), a $43.7 billion market cap energy infrastructure company. Following a 552% increase in its exposure to the company, the fund owns 981,770 shares of Common Stock, worth more than $57 million. Despite being the fund’s largest stake, other funds outrank PDT by far. For instance, Keith Meister’s Corvex Capital last disclosed ownership of 41.68 million shares of the company, worth more than $2.4 billion.

Williams Companies, Inc. (NYSE:WMB)

PDT’s activity for the second quarter is not hard to understand. The fund was most likely betting on the proposed merger with Access Midstream Partners LP (NYSE:ACMP), which could certainly drive growth to new levels. Several other capital projects also bode well for investors.

Costco Wholesale Corporation (NASDAQ:COST) is second in PDT’s list. This $55.6 billion market cap membership warehouses operator saw the fund boost its participation by 79% over the second quarter, to 482,662 shares of the company’s common stock.

The company recently posted comparable-store sales growth of 7% for August, beating estimates. In fact, this was a trend that we could witness across the second quarter: Costco Wholesale Corporation (NASDAQ:COST)’s sales beat analyst estimates in March, April and May. This would explain hedge funds’ bullishness. Other funds, like Ken Griffin’s Citadel Investment Group also added to their holdings over the period. Citadel now owns 1.38 million shares of the company. However, the largest hedge fund shareholder, Warren Buffett’s Berkshire Hathaway left its stake (4.33 million shares) untouched.

Last in this list is Priceline Group Inc (NASDAQ:PCLN), a $62.8 billion market cap online travel company that was added to PDT’s equity portfolio over the second quarter of 2014. The fund acquired more than $50 million in stock, or 42,226 shares of Common Stock. Stephen Mandel’s Lone Pine Capital also seems quite bullish about the company, as it more than doubled its stake over the period, and now owns 691,646 shares, worth more than $830 million.

Bets on Priceline Group Inc (NASDAQ:PCLN) make sense, as the company seems poised for long-term growth. Going forward, growth should be driven by greater penetration in underpenetrated international markets, in which it already has a strong position. Moreover, the acquisition of OpenTable Inc (NASDAQ:OPEN) and the investment in Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) are expected to drive growth even further.

Daniel Kurnos, a senior analyst at Benchmark Company, also noted that Booking.com, which is Priceline’s hotel reservation platform, “is making headways domestically, growing very strongly in Asia and internationally.”

Disclosure: Javier Hasse holds no positions in any stocks or funds mentioned