Billionaire Ken Griffin's Newest Stock Picks
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The end of earnings season does not mean the end of excitement for us at Insider Monkey; we keep our ears to the ground for the round of 13F filings that usually post during and after each quarterly earnings season. Hedge funds are required by the SEC to disclose many of their equity, option, and bond positions, and we analyze these documents to glean the most impactful information out of them each quarter. Our research has led us to find that the most popular small cap stocks amongst hedge funds have outperformed the market by 18 percentage points per year (learn more about this phenomenon here). Billionaire Ken Griffin of Citadel Advisors, LLC recently made his filing public; read on to see our take on his newest picks during Q4 2012.
Citadel’s quantitative investing model and $65 billion in AUM enables the fund to trade and hold thousands of positions at a time. Out of the 790 new stocks purchased in the last quarter of 2012, ADT Corp. (NYSE: ADT) was given the most capital, with 0.23% of the portfolio devoted to the security company. ADT commands 25% of the market share of the $13 billion industry in which it operates. The company reported earnings at the end of last month, delivering a 13% rise in net earnings year over year and announcing a $600 million common stock buyback from Credit Suisse International. The stock is still trading at a 15% deficit to analyst’s one year price targets. Doug Silverman of Senator Investment Group holds over $200 million of ADT.
Gulfport Energy Corporation (NASDAQ: GPOR) was Citadel’s second-largest new position. The independent oil and gas company has a relatively small market cap of $2 billion and operates primarily in the Louisiana Gulf Coast and in the Permian Basin. GPOR announced a public offering of 7.75 million shares of common stock in mid-February; the dilution brought on a drop in share price, contributing to the -6.3% depreciation the stock has returned since the start of 2013. Despite the near-term fall, Wall Street has high hopes for GPOR and its future site production, with most analysts issuing a Buy rating for Gulfport. Billionaire Jim Simons has a conservative $5.5 million invested (see his top picks here).
Autodesk (NASDAQ: ADSK) is a strong player in the CAD (computer-aided design) industry with its comprehensive and knowledgeable business solutions. Despite missing every earnings announcement in 2012, ADSK managed to beat its latest announcement in February, which came on the heels of positive ratings acknowledgement from Wedbush, RBC Capital, and Goldman Sachs in January. Higher revenues and higher earnings versus the prior-year quarter set the precedent that ADSK would like to continue in 2013, as the company guided revenue growth for this fiscal year. Two Sigma Advisors beefed up its position substantially according to its most recent 13F.
Cobalt International Energy (NYSE: CIE) was another new oil and gas play for Citadel; contrary to GPOR, CIE’s main exploration areas lie in the Gulf of Mexico and in offshore West Africa. The stock has suffered through the past twelve months, losing 22% of its value, with a significant drop occurring in January after the announcement of a 40 million share secondary public offering. Despite this, Wall Street is once again bullish on many of these smaller exploration companies, advocating accumulation and projecting much higher price targets for the future. Citadel initiated this position as a corporate bond purchase. Dallas-based HBK Investments made a similar debt investment in CIE.
Textron (NYSE: TXT) was the fifth-largest new addition to Citadel’s portfolio, comprising 0.07% of the fund’s assets. Also a bond purchase, Griffin devoted $43 million towards the fixed income investment. Textron operates in a wide number of industries, including defense, finance, and aerospace (Cessna jets, Bell helicopters). The company’s recent Q4 2012 earnings announcement in January showed a slight miss on the surface, although net earnings gave a profit and revenue grew over the same quarter from last year. Billionaire Steve Cohen joins Griffin in holding TXT bonds.
This article is written by Eric Winter and edited by Meena Krishnamsetty. They don't own shares in any of the stocks mentioned in this article. The Motley Fool owns shares of Textron. 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!