Billionaire Andreas Halvorsen’s New Stock Picks

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

We track quarterly 13F filings from hundreds of hedge funds, including billionaire (and Tiger Cub) Andreas Halvorsen’s Viking Global. We have found that the information in 13Fs can be used to develop profitable investing strategies; for example, the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year (learn more about our small cap strategy). By comparing the most recent filing to the previous one recorded in our database, we can also identify new picks that were added to an individual manager’s portfolio in the intervening time. These picks can serve as initial investment ideas, and investors can do more research on any stocks that sound appealing. Read on for our quick take on Viking Global’s five largest new holdings from the first quarter of 2013 (or see the full list of the fund's stock picks).

Viking’s top new pick

Halvorsen and his team bought over $1 billion worth of Boeing (NYSE: BA) between January and March, or more than 12 million shares. While Boeing had some hiccups earlier this year related to the safety of its new Dreamliner aircraft, those concerns appear to have been satisfied in the eyes of the market and the stock is up over 30% year to date. Its current price places it at a valuation of 14 times forward earnings estimates. SAC Capital Advisors, managed by billionaire Steve Cohen, reported a position of 1.8 million shares at the end of March (find Cohen's favorite stocks).

More stocks Halvorsen liked

The fund reported a new position of more than 44 million shares in cement company Cemex (NYSE: CX). The stock has roughly doubled in the last year, in part because of favorable conditions in the broader market (Cemex’s beta is 2.8). Halvorsen and other investors likely see cement as a way to play growing construction activity in the U.S. (as well as the rest of the world), leading them to buy despite the fact that Cemex has actually experienced net losses in each of the last four quarters, with revenue down in the first quarter of 2013 versus a year earlier.

According to the 13F, Viking Global owned 7.1 million shares of Adobe (NASDAQ: ADBE) at the end of the quarter after not having any shares in its portfolio at the beginning of the year. Adobe is another stock dependent on future growth: it carries trailing and forward P/Es of 41 and 27, respectively, making for pretty aggressive pricing in the market. In addition, it also reported declines in both revenue and net income in its most recent quarter (which ended in March) compared to the same period in the previous fiscal year.

Valero Energy (NYSE: VLO), a $21 billion market cap oil and gas refining and marketing company, was another of Viking Global’s new picks. The stock trades at 6 times earnings, whether we use trailing numbers or analyst consensus for 2014 in our analysis; really, the entire downstream portion of the oil and gas industry is carrying low multiples at this time. With analysts expecting Valero to increase its earnings over the next several years, the five-year PEG ratio is 0.7 and we think it’s well worth considering as a value stock alongside its peers.

Halvorsen disclosed ownership of 2.8 million shares of Marathon Petroleum (NYSE: MPC), another refining and marketing company. We’ve mentioned that this whole peer group is cheap going by earnings numbers, and Marathon (not to be confused with former parent Marathon Oil) is no exception with trailing and forward P/Es of 7. Financial results also appear to be on an upward trend, with double-digit percentage gains on both top and bottom lines last quarter compared to the first quarter of 2012.

Conclusion

We agree with Viking Global that downstream energy companies look interesting, and we would be interested in investigating Valero and Marathon compared to their peers. Boeing also has some appeal, although we might want to wait for more financial results there to better evaluate hitting analyst targets for next year. In the cases of Adobe and Cemex, we’re considerably less interested as we can see that recent results have not been strong while the current valuations seem to be speculating on high growth going forward.

If you're on the lookout for some currently intriguing energy plays, check out The Motley Fool's "3 Stocks for $100 Oil." For FREE access to this special report, simply click here now.


This article is written by Matt Doiron and edited by Meena Krishnamsetty. They don't own shares in any of the stocks mentioned in this article. The Motley Fool recommends Adobe Systems. 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