Billionaire Paul Tudor Jones’ Telecom and Tech Picks
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Insider Monkey has processed hundreds of 13F filings from hedge funds and other notable investors for the fourth quarter of 2012; these filings disclose many long equity positions that Tudor Investments Corp. had in its portfolio at the end of December. By aggregating 13F filings, we can develop investment strategies including imitating hedge funds’ most popular stocks in various categories (see how these strategies have performed in the past).
Billionaire Paul Tudor Jones made significant investments in the telecommunications and tech sectors in Q4 of 2012. Tudor Jones relies heavily on technical analysis in his trading, including the use of Elliot Wave Theory. It is believed that Jones used technical analysis to successfully predict a market drop on Black Monday in 1987 and made massive amounts of money shorting the market that day. Due to his legendary success as a trader, short-term investors may wish to emulate Tudor's holdings. (See Tudor's favorite small-cap picks.)
MetroPCS Communications (NYSE: TMUS) is a wireless broadband mobile communications company that offers voice services, data services, custom calling features and advanced handsets. Jones increased his number of shares in MetroPCS from 13,400 in Q3 to 2,485,224 in Q4 of 2012. MetroPCS is currently in negotiations for acquisition by T-Mobile, with a shareholder vote on the proposed deal scheduled for March 28.
If approved, the company's shareholders would receive $1.5 billion in cash, at $4.06 per share, and a 25% ownership stake in the new company. Jones's increased ownership is likely a bet on the favorable terms of the proposed merger. MetroPCS's share price has been in a trading range of $9.20 to $10.48 since the first of the year, but could rise significantly if the merger is approved. However, the terms of the merger deal are under increased scrutiny by large MetroPCS shareholder John Paulson, who held 38 million shares during Q4 of 2012.
Tudor Jones also increased his investment in Vodafone Group Plc (NASDAQ: VOD) by 817% in Q4 of 2012. Vodafone is another mobile communications provider headquartered in the U.K. The company has a 45% stake in a joint venture with Verizon to operate Verizon Wireless. Vodafone is facing decreased revenues in Europe. The company recently reported a 2.6% decrease in group revenue for 2012, year over year, as well as decreased revenues from its operations in Southern Europe, including the economically hard-hit Spain and Italy. Vodafone's share price took a 10% dive over a number of days after the disappointing numbers were reported, and is currently trading below its 50 and 200 day SMA.
Frontier Communications (NASDAQ: FTR) is a communications company providing a variety of voice, data, Internet, and television services, with a focus on rural communities in the United States. Tudor Investment Corp. reported that it held 4 million shares of Frontier in Q4 of 2012, which is up 48% from Q3. The company sports a very attractive dividend yield of 9.66%. However, the continued viability of yield in the traditionally dividend laden telecommunications sector may be in question.
Frontier's stock price took a 12% nose dive from Feb. 13-15 on news that its competitor, Centurylink, was cutting its dividend. This spooked the entire sector, and other smaller-cap telecom companies fell on the news as well. Hence, investors should take the future prospects for dividends into account before creating a position in Frontier.
Let's see a couple of Tudor's tech picks for Q4 of 2012.
An interesting tech pick from Jones is Western Digital Corp. (NASDAQ: WDC). He increased his holding in the company from 6,300 shares in Q3 of 2012 to 283,900 shares in Q4 of 2012. Western Digital manufactures hard drives and other data storage devices. The company released positive earnings news in January with a fiscal second-quarter profit of $335 million, compared with $145 million for the prior year period. The company's share price has rebounded an impressive 40% since early December, and is currently trading above its 50 day and 200 day SMA. However, the run-up is potentially near a top, as the stock is within striking distance of a multi-year high, and daily volume appears to be falling slightly. Further, the stock has a beta of 1.48 and shows some signs of volatility. As such, it is quite possible that Tudor Investment Corp. may have already liquidated some of its position in the company, thereby locking in gains.
A final tech pick from Tudor Jones is VMware (NYSE: VMW). VMware recently announced lowered guidance for 2013 and job cutbacks. The market reacted negatively, and the company's stock price has gotten hammered by over 23% year to date, and over 28% for the prior year. The stock is heavily shorted with a short float of around 14%. Despite other hedge funds investing in VMWare, investors may want to stay away until it appears that the company's fortunes are on the rebound. (See what other notable hedgie is investing in VMware.)
Paul Tudor Jones's picks indicate an attempt to profit from consolidation among companies in the telecommunications sector, as well an attempt to gain exposure to dividend yield. Investors should continue to pay attention to Tudor Investment Corp.'s 13F filings to see what moves Tudor Jones makes this quarter.
This article is written by Joshua Reider and edited by Jake Mann. Insider Monkey's Editor-in-Chief is Meena Krishnamsetty. Meena has long positions in VOD and FTR. The Motley Fool recommends VMware and Vodafone. The Motley Fool owns shares of VMware and Western Digital.. 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!