Should You Follow These Billionaire Investors’ Lead?
Raj is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Fundamental research is any investor’s best friend, but there are many other tools that you may use to expand your investment universe and gather more stock candidates. SEC provides many such tools that may help you use secondary research in a fruitful manner. For example, the SEC issues 13Fs, which shows the purchases made by professional investors such as hedge funds. The 13F is filed quarterly and while the information provided may be a little late, it still provides valuable information. So, let’s take a look at major investments made by two major hedge fund stalwarts.
First, let’s take a look at Ken Griffin’s pick of Walt Disney (NYSE: DIS). Ken Griffin manages Citadel Investment Group and according to the latest 13F, the fund boosted its stake in Disney by 800% in the last quarter.
What is Disney up to?
Currently, Disney is enjoying its moment as its creation ‘Monster University’ is leading at the box office. However, in the recent past, its stock price took a tumble and is currently trading about 10% off its 52-week peak.
The beauty of Disney lies in its diversification. The company holds interest in movies, entertainment parks, and interactive media. Disney is currently looking towards the release of its Infinity game, which is expected to shake up the video game industry. The game incorporates real toys interacting with the video game characters and competes directly with Activision Blizzard’s (NASDAQ: ATVI) Skylanders.
Disney’s interactive media business has been posting continuous losses, but the tide may turned around if Infinity can replicate the success of Skylanders. Activision's game took 15 months to garner $1 billion worth of sales and became one of the most successful video games targeted towards younger audience. Disney will also be able to build synergy between its various business segments as Infinity will feature characters like Jack Sparrow. Infinity received good reviews at E3 and looks like it has a good future ahead.
Why invest in Disney
Disney reported robust results for its first quarter, with 10% increase in revenue on YoY basis. Its pretax income also grew 21%. The stock itself has appreciated over 30% in the past 12 months, despite witnessing some sell-off in the last one month. Its Price to earnings ratio is below 19, which is in line with the industry average. While the stock provides good capital growth, it also offers a 1.20% dividend yield. The company currently has a dividend payout ratio of only 23%, leaving room for future dividend growth.
With movies like Iron Man 3 and Monster University making a splash, the company should announce good results. On the flip side, Disney is set to see more competition and the growth rate has been on the decline for quite some time. At the very same time, the company is in a robust position. Any pullback in Disney's stock price can be used as a good entry point.
Nokia - An attractive takeover target
Nokia (NYSE: NOK) emerged as a favorite of Louis Moore Bacon of Moore Capital Management. The Finnish company is generally regarded as down and out but its stock has gained over 59% in the past 52 weeks.
It is not just Louise Moore showing interest in Nokia, but apparently Microsoft is also interested in the company. Rumors suggest that Microsoft held discussions to acquire Nokia’s phone business. The first thing to note is that Microsoft is not looking to acquire all of Nokia, if it is going to acquire it at all. It is only considering the smartphone segment. However, the veracity of this rumor is highly questionable. At the very same time, Nokia has also been approached by Huawei.
Apart from being an attractive takeover target, the company also seems to benefit from shifting its focus from developed markets towards the developing ones in Africa and Asia. At the very same time, it is also doing its best to tap somewhat saturated markets like the US. Nokia is currently on the verge of unveiling its latest smartphone, the Lumia 925, rumored to be equipped with a 41 MP camera. While camera stats sound impressive, investors would be better off not expecting too much from the Lumia 925 launch. Very limited carrier support, a not so popular Windows OS, and other aesthetics issues are likely to overshadow camera innovation.
Why invest in Nokia
With its cloudy outlook, it is difficult to make a long-term case for Nokia. However, it is a good stock for a medium-term speculative play. In the short-term, the stock may gain on many grounds, including takeover interest. The upcoming Lumia 925 launch in the U.S. is also likely to create some buzz.
Nokia is scheduled to announce its quarterly numbers on July 18. For the fourth quarter of FY2012, the company issued a positive forecast. Nokia is well positioned to report encouraging results in July as well and this may prove to be a good catalyst for a short-term spike. Overall, Nokia may not be recommended for a buy and hold strategy, but the stock is an interesting candidate for short-term play.
Both Disney and Nokia are veterans in their field, but their current status could not have been more different. While Disney is still going strong, Nokia seems to be struggling to stay afloat. However, both the stocks have garnered favor from hedge funds and certainly demand a good consideration from retail investors as well. Disney has good long-term potential and its near-term positive catalysts include good box office performance of its latest blockbuster movies and upcoming launch of Infinity.
Nokia, on the other hand, looks like a good short-term play as the stock may move higher on the back of the upcoming U.S. launch of the Lumia 925. The company also looks primed to report healthy quarterly numbers, which may push the stock price higher.
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Raj S has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard and Walt Disney. The Motley Fool owns shares of Activision Blizzard and Walt Disney. 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!