Robert Pitts‘ Steadfast Capital Management recently filed its 13F with the Securities and Exchange Commission (SEC). Steadfast Capital Management is a New York-based, employee-owned hedge fund with over $10 billion in assets under management (AUM). The fund’s latest 13F reveals that its public equity portfolio is worth $7.17 billion as of March 31, 2015 with almost 10% of it invested in Allergan PLC (NYSE:AGN) (formerly Actavis plc (NYSE:ACT)). 23% of the fund’s equity portfolio as of the reporting period iss constituted of stocks from the information technology space, while 20% consists of stocks from the healthcare sector. Moreover, during the first quarter the fund increased its stake in 30 companies, sold out 12 holding entirely, reduced its stake in 11 companies, and initiated a stake in 14 stocks. In this article we are going to focus on Steadfast’s top three of those 14 newly-initiated picks, which are Apple Inc. (NASDAQ:AAPL), Valeant Pharmaceuticals Intl Inc (NYSE:VRX), and JD.Com Inc(ADR)(NASDAQ: JD).
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But before we proceed to dissecting Steadfast Capital Management’s top new picks, let’s take a minute to understand how investors can benefit from tracking hedge funds’ moves. We have been researching 13F filings of hedge funds over a period of the last 16 years, and our research revealed that in the period between 1999 and 2012, the 15 most popular small-cap picks among hedge funds often outperformed the overall market. The most popular stocks overall on the other hand (mostly made up of large-cap stocks) underperformed the S&P 500 by seven basis points during that period. That’s not all; since the start of forward testing in August 2012, Insider Monkey’s small-cap strategy has outperformed the S&P 500 ETF (SPY) by 80 percentage points, returning 135%.
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According to our research, Apple Inc. (NASDAQ:AAPL) was the second-most popular stock among hedge funds during the first quarter, so it isn’t a surprise that funds like Steadfast Capital Management were initiating stakes in the popular company. In Steadfast’s case, it bought almost 2.5 million shares during the quarter, which were valued at about $310 million as of March 31. Apple recently garnered a lot of media attention due to its tussle with singer Taylor Swift over not paying artists for streaming their songs through its newly-launched service Apple Music’s first 3-month free subscription. The issue was resolved later when Apple Inc. (NASDAQ:AAPL) put its foot down and agreed to pay the artists. Being the largest company in the world, almost all analysts on the Street cover the stock and most of them have a ‘Buy’ rating on it. While the Street has an average price target of $147.28 on the stock, legendary activist investor Carl Icahn feels the shares are currently worth $240, almost double where they are trading right now. As of March 31 Icahn’s Icahn Capital LP owns over 52 million shares in Apple Inc. (NASDAQ:AAPL), the largest position among the over 700 hedge funds we track.
Valeant Pharmaceuticals Intl Inc (NYSE:VRX) was the second-largest addition to Steadfast’s public equity portfolio in the first quarter, with the fund holding over 918,000 shares valued at $182.5 million as of March 31. Valeant Pharmaceuticals Intl Inc (NYSE: VRX) has made a reputation for itself on the Street as a formidable deal-maker in the pharmaceutical space. At the Sohn Investment Conference in May this year, renowned activist investor Bill Ackman mentioned that he thinks Valeant Pharmaceuticals Intl Inc (NYSE:VRX) has the potential to become the next Berkshire Hathaway Inc.(NYSE:BRK.A). In the past few weeks there have been reports that the company has approached animal health company Zoetis Inc (NYSE:ZTS) for a merger. Most analysts are bullish on the stock, with an average recommendation of ‘Buy’. Bill Ackman’s Pershing Square and Jeffrey Ubben’s ValueAct Capital held nearly identical stakes of 19.4 million shares in Valeant Pharmaceuticals Intl Inc (NYSE:VRX) at the end of the first quarter, with Ackman’s being a new position.
Steadfast initiated a stake in Chinese e-commerce behemoth JD.Com Inc(ADR)(NASDAQ: JD) in the first quarter as well, by purchasing 4.37 million shares of the company, which were valued at $128.46 million as of March 31. The company recently announced a partnership with ZestFinance through which it plans to use the vast amount of consumer data on its platform to develop a credit scoring feature. JD.Com Inc(ADR)(NASDAQ: JD) had its U.S. IPO in May, 2014 and since then the company’s stock has appreciated by almost 65%. Of the 25 analysts who cover the stock, 13 have a ‘Buy’ rating on it while 9 have a ‘Hold’ rating. The Street expects the company to declare a negative EPS of $0.06 for the current quarter. Lei Zhang‘s Hillhouse Capital holds the largest stake in JD.com, consisting of over 143.40 million Sponsored ADRs, each being equivalent to two common shares.
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