Billionaire Paul Tudor Jones’s Top Five Picks for 2013
Meena is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
By definition, hedge funds are often thought of as being an investment tool for elite investors capable of risking millions of dollars on high-risk and, often times, underperforming investments. However, there are many hedge funds that are not only managed by some of the world’s most talented managers, but routinely outperform many of the more traditional funds. At Insider Monkey, we track 450 of the world’s most elite hedge fund managers and our research has shown that historically, there have been ways to beat the market if you pay attention.
For more than a decade in our back tests, our strategy outpaced the broader indices by 18% a year, and since we've started sharing these picks with the public, it has beaten the S&P 500 by more than 20 percentage points (learn how to use this strategy yourself).
Furthermore, it's also crucial to look at each of the funds we track individually, and by using the latest round of fourth quarter 13F data from the SEC, we can determine how the hedgies were preparing for 2013. Let's take a look at one fund in particular: Paul Tudor Jones's Tudor Investment Corp. Here are his top five equity positions beginning with No. 1.
Topping the list is Apple (NASDAQ: AAPL). There’s little argument that Apple has had a very rough start this year as shares are down more than 20% from the first of the year. Part of the problem is the dearth of news coming from the tech-giant. Although rumors that the iWatch will be the next must-have gadget, the company is still eerily silent about what it plans to do with its $137 billion cash surplus. And with competition from Samsung’s Galaxy SIV, Apple’s dominance in the smart phone market may be starting to fade.
However, things might be looking a bit more promising with the latest endorsement from Warren Buffett (see what Buffett has been buying) who advised Apple CEO Tim Cook to start buying back shares at their currently depressed price. Since there is clearly nothing fundamentally wrong with Apple, the stock’s current price-to-book multiple of 3.2 versus the industry’s average of 3.8 indicates that it remains a good value play, and a dividend yield near 2.5% offers plenty of income for those who seek it.
Coming in at No. 2 is Vodafone Group (NASDAQ: VOD). Vodafone has had a tough start to the new year as well on what we suspect is not only its exposure to the fledgling European market, but on a lackluster earnings report last month. On the bright side, the company is hedged against any severe market swings in Europe with its Verizon stake, and shares are starting to inch their way off a 52-week low of $24.55 hit early last week. Tudor upped his stake by 817% last quarter, and there are plenty of reasons to believe Vodafone will see a bump this year, whether it's the telecom giant’s emerging market expansion or its generally discounted price at current levels.
Third in Tudor’s equity portfolio is Abercrombie & Fitch (NYSE: ANF). After a disappointing earnings report last month, Abercrombie took a beating by dropping close to 13% in just over two days on a bleak full-year forecast. Not surprisingly, Tudor cut their exposure by 30% in the fourth quarter. Compared to its closest competitors American Eagle and The Gap, trading in Abercrombie at the moment looks absolutely anemic. Although the retailer hopes that increased European exposure can boost sales, the notoriously fickle teen market with very few barriers to entry is easily infiltrated by the “next big thing,” à la Forever 21.
There are really only two names in the home improvement market, and one is Lowe’s (NYSE: LOW), sitting at fourth in Jones’s top five. Blindsided by Home Depot’s very strong sales report last month, Lowe’s tumbled to a one-month low of $35.86. Fortunately for bullish investors, the tailspin was very short-lived. Above the $38 mark now, the stock is climbing partially due to continued optimism over a recovery in the housing market, in addition to a weather-related boost in sales from Hurricane Sandy and winter storm activity. There’s little argument that Home Depot is the leader in home improvement sales, but Lowe’s maintains its niche among do-it-yourselfers that favor style over function.
Coming in at fifth is Fossil (NASDAQ: FOSL). Like Abercrombie, Fossil has been adversely impacted by sluggish activity in Europe. Although the stock is making steady progress off $98.65 from the beginning of last week, there isn’t a lot of enthusiasm surrounding Fossil right now. Most analysts recommend a hold with an upside potential of around $112, but the problem with Fossil is, again like Abercrombie, more macro-related.
Generally speaking, there are low barriers to entry in this space, and high-end retail sales are very sensitive to economic turbulence. Much of today’s price gains could be attributed to the positive retail sales figures that came from Johnson-Redbook (+1.3%), but this is still lower than the expected gain of 1.6%. Once these numbers are digested into the market, Fossil could experience some light profit taking around $106-$107.
The bottom line
With all of this in mind, it’s important to track hedge fund sentiment, particularly that of the world’s billionaire money managers. Paul Tudor Jones is always a good investor to pay attention to, and his top five equity holdings give “monkeys” a solid starting point for further research.
This article is written by Amy Thielen and edited by Jake Mann. Insider Monkey's Editor-in-Chief is Meena Krishnamsetty. Meena has long positions in AAPL and VOD. The Motley Fool recommends Apple, Fossil, Lowe's, and Vodafone. The Motley Fool owns shares of Apple and Fossil. 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!