Hedge Fund Zweig Dimenna’s Stock Picks for 2013 Include Apple

Meena is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Zweig Dimenna was founded in 1984 by Martin Zweig and Joe DiMenna. The hedge fund recently filed its 13F for fourth quarter of 2012, disclosing many of its long equity positions as of the end of December (and, therefore, the stocks it owned going into 2013). Our research has shown that investors could have outperformed the market significantly by imitating the most popular stock picks of hedge funds (see the details). Zweig DiMenna is one of the hedge funds we pay attention to. We think their stock picks can be useful sources of investment ideas for investors who consider each name and decide if it is worth taking a closer look at the company. Read on for our thoughts on five of the large-cap positions in the fund’s 13F portfolio and compare them to previous filings.

The largest holding according to the 13F was Apple (NASDAQ: AAPL), with Zweig Dimenna reporting a position of about 230,000 shares. This was about even with what the fund had owned three months earlier. Apple had been the most popular stock among hedge funds in the third quarter of the year (see the full top ten list). The stock currently trades at 11 times trailing earnings, with Wall Street analysts projecting high earnings growth over the next several years and therefore a five-year PEG ratio of 0.5. While we do think that Apple faces challenges to its business that should result in low margins, and so we aren’t quite that optimistic, we do think that it is a good value at its current price.

Zweig Dimenna had initiated a position in American International Group (NYSE: AIG) during the third quarter of 2012, and according to its new filing it had almost doubled its ownership of the insurer over the course of Q4 to a total of 1.7 million shares. AIG is another stock whose financial metrics make it look cheap:Tthere is a steep discount to the book value of the equity, resulting in a P/B ratio of 0.6, and the current-year P/E is only 11. While we don’t think that AIG is worth its book value, and we wouldn’t expect it to trade there due to poor market sentiment, we do think that discount should be smaller.

Google (NASDAQ: GOOG) was another popular stock (it joined Apple and AIG in our ten most popular stocks list) that the fund liked last quarter, as Zweig Dimenna increased its holdings here as well. Billionaire Stephen Mandel’s Lone Pine Capital had reported a position of 1.1 million shares at the end of September, making it one of that fund’s top picks at that time. Google’s net income was up slightly last quarter versus a year earlier, as strong search growth overcame the hit to earnings, which accompanied the acquisition of Motorola Mobility Holdings. The trailing earnings multiple here is 24.

The fund owned about 260,000 shares of Visa (NYSE: V) at the start of 2013. In the fourth quarter of 2012, Visa experienced a 12% increase in sales compared to the same period in the previous year and this pushed net income up 26% in conjunction with higher margins. However, the market has already priced in quite a bit of future growth as Visa carries trailing and forward P/Es of 44 and 19, respectively. While we like Visa as a company, it might not make for a good value stock right now.

$6.8 billion market cap biopharmaceutical company BioMarin Pharmaceutical (NASDAQ: BMRN) was another of Zweig Dimenna’s top picks. The fund increased its stake to about 760,000 shares from about 600,000 shares at the beginning of October. Many of BioMarin’s products are still in the development stage, so the company has been unprofitable in each of the last four quarters, with the sell-side expecting losses in 2013 as well. 11% of the outstanding shares are held short despite the fact that the stock is up 47% in the last year has become more optimistic about BioMarin’s prospects.


This article is written by Matt Doiron and edited by Meena Krishnamsetty. Meena has long positions in Apple and Google. The Motley Fool recommends American International Group, Apple, BioMarin Pharmaceutical, Google, and Visa. The Motley Fool owns shares of American International Group, Apple, and Google and has the following options: Long Jan 2014 $25 Calls on American International Group. 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!

blog comments powered by Disqus

Compare Brokers

Fool Disclosure