This Hedge Fund Loves the Mega-Caps

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Edinburgh Partners is a Scotland-based hedge fund managed by Sandy Nairn, and was founded in 2003. Edinburgh focuses on a long-term investment strategy and invests in equities, with a fundamental and bottom-up approach. Edinburgh's top five holdings make up over 60% of the firm's 13F. The firm's most recent 13F - which is filed by hedge funds and notable investors revealing the majority of the public securities they own - includes three picks with market-caps in excess of $220 billion and one at $100 billion. In reviewing Edinburgh's filing, we have outlined the firm's top five holdings:

Google (NASDAQ: GOOG) is Edinburgh's top 13F holding and makes up 13.3% of the fund's 13F portfolio. The company's Motorola Mobility acquisition should help boost 2013 revenues - expected to be up 15%, despite interim earnings pressures related to the purchase. The search company is seeing positive trends in online advertising and international expansion, while the Motorola Mobility segment alone is expected to see 2013 revenues up 5%. The hardware segment should pair well with Google's leading mobile Android OS. Although the Motorola integration has put a strain on Google's growth and margins, it obviously still has a stronghold on the search market, with over 60% of U.S. searches going through Google. Billionaire George Soros took a new position in the stock last quarter (check out George Soros' newest picks).

Cisco Systems (NASDAQ: CSCO) is another tech giant, one that specializes in communications equipment. With a 13x P/E, Cisco trades well below other competitor Ericsson at 16.5x earnings. The company does expect to see solid revenue growth over the interim at 5%+ for the next two years with new products and data center expansion. Driving this revenue growth should be an overall increase in global bandwidth usage, where Cisco should manage to see market share gains in routing. The interim weakness, however, should continue due to weakness in IT spending. The tech giant does pay a solid 2.7% dividend yield and has a robust $45 billion in cash - compared to its $3 billion annual dividend payout.

Read more to see Edinburgh's other major investments...

Microsoft (NASDAQ: MSFT) is Edinburgh's third largest 13F holding and made up 12.2% of its 3Q 13F portfolio. The tech giant expects to see revenues up nearly 10% in FY2013 (ending in June) with a suite of new - and old - products leading the way. New additions to Microsoft's offerings include a tablet and the Windows Mobile operating system. Upgrades from the Office Suite products and operating system (Windows 8) should also help. It appears that Microsoft is one of the cheapest tech stocks around with a P/E of 14.5x and a forward P/E of only 8x. Ken Fisher - long-time Forbes columnist and founder of Fisher Asset Management - is one of Microsoft's top-name investors with over 18 million shares (check out Ken Fisher's biggest bets).

Illinois Tool Works (NYSE: ITW) is a manufacturer of industrial products and equipment, and is also Edinburgh's fourth largest 13F holding. The equipment company pays a 2.4% dividend yield, and on a P/E basis, Illinois trades at 15x earnings despite being up 30% over the last twelve months. This is well in line with Dover Corporation (15x). A key growth driver for Illinois should come by way of increased auto demand, pushing its equipment segment higher. Longer-term demand should be driven by entry into international markets, notably China and India.

Wal-Mart (NYSE: WMT) is a massive global retailer with revenues expected to be up over 4% in FY2013 and FY2014. Wal-Mart trades well in line with its major competitor Target on a P/E and a P/S basis. Other news shows Wal-Mart making an effort to infringe on Target's territory, with the opening of a number of stores in Target's native territory of Minnesota. Both companies are managing to gain market share with low-priced consumer product offerings, and have managed to mitigate downside economic pressure thanks to a robust portfolio of discretionary items. Warren Buffett is the top fund owner in WMT of those we track with over 46 million shares (check out Warren Buffett's new picks).

To recap: Edinburgh has a notable top-heavy portfolio of mega-cap stocks with a tech concentration. Microsoft and Cisco trade on the relatively cheap side in their industry, but Google has some of the best growth prospects. Illinois and Wal-Mart should also perform well on the back of a rebounding economy.

This article is written by Marshall Hargrave and edited by Jake Mann. Insider Monkey's Editor-in-Chief is Meena Krishnamsetty. Meena has long positions in GOOG and MSFT. The Motley Fool recommends Cisco Systems, Inc., Google, and Illinois Tool Works, Inc.. The Motley Fool owns shares of Google and Microsoft. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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