Hedge Fund Tiger Consumer Management’s Top Stock Picks
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The most popular small cap stocks among hedge funds tend to outperform the S&P 500 by an average of 18 percentage points per year, according to our historical analysis of 13F filings (learn more about imitating hedge funds' small cap stock picks). We also like to study what hedge fund managers and other notable investors own according to their 13Fs, which disclose many long equity positions as of the end of the last fiscal quarter (so current 13Fs, filed in February, provide information from December).
While blindly following these stock picks often isn’t a good idea, we think that it can be useful for investors to see a short list of top stock picks and then decide if they are worth further research--much like how many investors treat stock screens. Here are the five largest holdings by market value from Tiger Cub Patrick McCormack’s Tiger Consumer Management as of the most recent 13F.
Tiger Consumer’s top pick was Google (NASDAQ: GOOG), reporting a position of over 190,000 shares. Google made our list of the most popular stocks among hedge funds for the fourth quarter of 2012, as measured by the number of funds that included it in their portfolio (find more stocks hedge funds loved). The company experienced a 7% increase in earnings last quarter compared to the fourth quarter of 2011, as search growth overcame the addition of Motorola Mobility Holdings. The integration of Motorola provides a source of potential improvement for Google.
The fund owned 2.8 million shares of Kraft Foods (NASDAQ: KRFT) at the end of December. Kraft operates as a North American-based food and beverage company following the breakup of the larger Kraft company into Kraft Foods and Mondelez International. Each of these was among hedge funds’ favorite consumer goods stocks according to our database of 13F filings. Analyst consensus for 2014 implies a forward P/E of 16, which is in line and perhaps a bit cheaper than where many other packaged food companies trade.
McCormack and his team increased their stake in Home Depot (NYSE: HD), which is currently a common way to speculate on a booming housing market, by 29% to a total of 1.9 million shares. Up 43% in the last year, Home Depot currently trades at 23 times trailing earnings. The company has been doing quite well recently; in the fiscal quarter ending in early February, sales were up 14% compared to the same period in the previous fiscal year, and earnings rose 32%. Billionaire Ken Fisher’s Fisher Asset Management owned 8.3 million shares of Home Depot at the beginning of 2013 (check out Fisher's stock picks).
Visa (NYSE: V) was another of the fund’s top stock picks. Credit card stocks have generally been doing well in the last year, and Visa is no exception with a 36% rise in the stock price. Interestingly, Robertson himself and some other Tiger Cubs were selling Visa between October and December. Visa’s forward earnings multiple, based on expected earnings for the fiscal year ending in September 2014, is 19. However, the company has been performing well on both top and bottom lines.
Tiger Consumer Management initiated a position of 1.7 million shares in Liberty Global (NASDAQ: LBTYA). The $18 billion market cap cable TV, Internet, and phone company is a favorite of many hedge funds, including Tiger Global Management, a fellow Tiger Cub fund (see more stocks Tiger Global was buying). While the earnings multiples are high at this time, Wall Street analysts are projecting high growth for the next several years, and their trajectory brings the five-year PEG ratio down to 1.
This article is written by Matt Doiron and edited by Meena Krishnamsetty. Meena has a long position in Google. The Motley Fool recommends Google, Home Depot, and Visa. The Motley Fool owns shares of Google. 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!