Multi Billion Dollar GMT Capital’s Top Stock Picks
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GMT Capital, a fund that was founded in 1990 by Thomas Claugus, filed its 13F for the second quarter last month, disclosing a number of its long equity positions. Claugues, equipped with a MBA from Harvard Business School, keeps his fund focused on long-term value. Read on to see the top five holdings listed on the 13F or see our longer list of GMT's favorite stocks.
GMT’s top position at the end of June was United Continental Holdings (NYSE: UAL). Airlines are notoriously poor investments; United itself exited bankruptcy in 2006. However, the industry is beginning to look like a good value as recent consolidation (including the merger of United and Continental, and the potential for a suitor to buy American Airlines out of bankruptcy) may enable higher share prices. Billionaire David Tepper’s Appaloosa Management owned 9.5 million shares at the end of June, while GMT owned 10.4 million. United Continental is expected to see a large pop in earnings next year, to $4.74 per share; at current prices that’s a forward P/E of only 4. The stock’s five-year PEG ratio is 0.4.
Canadian Natural Resource (NYSE: CNQ) was another of GMT’s top picks as the fund reported ownership of 8.5 million shares at the end of the second quarter. Canadian Natural Resources produces oil, natural gas liquids, and natural gas worldwide (though primarily in North America, as might be expected from its name), and so is tied to the prices of these commodities in the market. At a market capitalization of $36 billion, it trades at 12 times earnings (either on a trailing basis or when using sell-side estimates for 2013).
GMT owned 6.2 million shares of Celanese (NYSE: CE), a $6.5 billion chemicals company that provides compounds including polymers, food and pharmaceutical preservatives, and acetyl products. Considering Claugus worked at a polymers company, he may like Celanese based on his industry knowledge. As a basic materials company, Celanese is highly exposed to the broader market with a beta of 1.9. However, with trailing and forward P/E’s of 10 and 9, respectively, the company is a potential value stock candidate. In its most recent quarter, revenue was down 4% compared to the same period in the previous year but earnings were up 3%.
Anadarko Petroleum (NYSE: APC) led our list of the ten energy stocks hedge funds are crazy about for the second quarter of 2012, as a total of 54 hedge funds and other notable investors in our 13F database reported a position in the stock. The 2.2 million shares that GMT owned, up slightly from its position at the end of March, made it one of the funds on oru list. Much of Anadarko’s business is centered in the onshore U.S., which is seeing a boom in production. Anadarko trades at 17 times forward earnings estimates as analysts expect that a recovery in natural gas prices will power its revenue and earnings higher.
The fund also liked $4.2 billion market cap designer and manufacturer of electronics equipment Flextronics International (NASDAQ: FLEX). Flextronics’s business was down last quarter as it reported a 20% drop in revenue compared to a year ago, and a slight decline in income. It is another high-volatility stock, carrying a beta of 2. Yet it is also another stock with good value potential, particularly if Wall Street analysts are correct in giving it optimistic earnings projections: the trailing P/E is 9, the forward P/E is 6, and the five-year PEG ratio is only 0.6.
This article is written by Matt Doiron and edited by Meena Krishnamsetty. They don't own shares in any of the stocks mentioned in this article. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.