Several weeks after the end of each quarter, hedge funds and other major investors are required to file 13Fs with the SEC to disclose many of their long equity positions in U.S. stocks as of the end of that quarter. While this does mean that the information included in 13Fs is a bit old, there are still a few ways for investors to make use of it. For one, we have found that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year and we think that other strategies are possible as well. We can also look at individual managers’ top picks in a number of areas, such as dividend stocks, and treat these as free investment ideas. Read on for our quick take on five of billionaire David Harding’s Winton Capital Management’s holdings as of the end of March whose current dividend yields are 3.5% or higher (or see the full list of Winton’s stock picks).
Electric utility DTE Energy Co (NYSE:DTE), which operates in southeastern Michigan, was one of Winton’s top stock picks. As is generally the case for electric utilities, DTE has little exposure to the broader economy (the stock’s beta is 0.2) and pays a high dividend yield (of close to 4%). Quarterly dividend payments have actually increased decently over the last few years- the payment is 17% higher than it was three years ago. Cliff Asness’s AQR Capital Management reported a position of about 950,000 shares at the end of the first quarter of 2013 (find Asness’s favorite stocks).
The fund kept its stake in pharmaceutical company Eli Lilly & Co. (NYSE:LLY) about constant at close to 780,000 shares. Eli Lilly has been making quarterly payments of 49 cents per share since early 2009, which makes for a yield of 3.7% at current prices. However, Wall Street analysts expect earnings per share to be considerably lower in 2014 than they have been on a trailing basis- in fact, the stock trades at 19 times forward earnings estimates. Billionaire Stanley Druckenmiller was another major shareholder in Eli Lilly out of the filers we track (check out more stocks Druckenmiller likes).
NextEra Energy, Inc. (NYSE:NEE), an electric utility formerly known as FPL Group (and Florida Power & Light before that), was another of Winton’s high yield picks with the filing disclosing ownership of a little less than 540,000 shares. The dividend yield here is 3.5%, and as with DTE we have a fairly low beta here (0.3). We would note that the trailing P/E multiple is 18, and also that NextEra did experience a decline in earnings last quarter compared to the first quarter of 2012. Billionaire Israel Englander’s Millennium Management’s 13F showed that fund with 1.5 million shares of NextEra at the beginning of April.
Winton increased its stake in Altria Group Inc (NYSE:MO) by 29% to a total of 1.1 million shares. Altria Group Inc (NYSE:MO)’s dividend yield is almost 5%, as cigarette companies (Altria Group Inc (NYSE:MO) was formed from the breakup of Philip Morris) continue to be reliable cash cows. In the first quarter of 2013, the company’s net income rose by 16% versus a year earlier though we’d be somewhat concerned by the fact that revenue was about flat. Altria Group Inc (NYSE:MO) was one of the top picks in David Winters’ Wintergreen Advisors’ portfolio at the end of the quarter (see more stocks Wintergreen reported owning).
Disclosure: I own no shares of any stocks mentioned in this article.
