Blue Ridge Capital LLC is a New York-based hedge fund that was founded in 1996 by the former president of Julian Robertson’s Tiger Management, John Griffin. The investment management firm employs a long/short investing approach, but is generally more inclined to engage in long positions. Even though John Griffin’s investment strategy is biased towards long positions, the shorts assist the growth of his portfolio during poor market conditions, when returns on long positions are more difficult to come by. Surprisingly, Blue Ridge Capital managed to deliver an exorbitant return of 65% in 2007 simply by running a long/short portfolio. At the same time, the financial crisis of 2008 didn’t hit Blue Ridge Capital too hard, as the fund reported a loss of only 8% at the end of that year. According to the fund’s latest 13F filing, the value of its public equity portfolio was $8.77 billion as of March 31. Our backtests of Griffin’s public equity portfolio during the period of 1999 to 2012 reveal that his top five large-cap (i.e. companies with over $20 billion in market capitalization) stock picks easily outpaced the S&P 500 over this period. Not only that, they even bested the picks of legendary investor and one of the richest men in the world, Warren Buffett. John Griffin’s top five large-cap stocks generated an average monthly return of 0.84% compared to a 0.32% average monthly return for the S&P 500 during the same time span. In this article we will list and discuss the top five, market-beating large-cap picks of John Griffin, which currently includes: Charter Communications Inc. (NASDAQ:CHTR), Actavis plc (NYSE:ACT), Walgreens Boots Alliance Inc. (NASDAQ:WBA), Priceline Group Inc. (NASDAQ:PCLN) and Thermo Fisher Scientific Inc. (NYSE:TMO).
We follow hedge funds like Blue Ridge Capital because our research has shown that their stock picks historically managed to generate alpha even though the filings are up to 45-days delayed. We used a 60-day delay in our backtests to be on the safe side and our research showed that the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. After adjusting for risk, our calculations revealed that these stocks’ monthly alpha was 80 basis points. We have also been sharing and tracking the performance of these stocks since the end of August 2012, during which time they have returned 142%, outperforming the S&P 500 ETF by nearly 85 percentage points (see more details here).
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Charter Communications Inc. (NASDAQ:CHTR) is John Griffin’s top stock pick when measured by the value of shares held. Blue Ridge Capital increased its equity holding in Charter Communications by 210,000 shares during the first quarter, which amounted to an increase of 7.69% to the fund’s overall stake in the company, to 2.94 million shares, which were valued at $567.74 million. The stock has increased by over 3% year-to-date as the company has continuously attempted to enhance its growth and development. On May 26, Charter Communications announced the acquisition of New York-based pay-TV operator, Time Warner Cable Inc. (NYSE:TWC), at a price of $195.71 per share. Around the same time, Charter also revealed its plans to acquiring Bright House Networks, which is the seventh-largest cable-TV operator in the U.S., a deal which will eventually create the leading broadband services and technology company in the country. John H. Scully’s SPO Advisory Corp and Warren Buffett’s Berkshire Hathaway represent some of the largest shareholders in Charter Communications Inc. (NASDAQ:CHTR), owing 6.47 million shares and 5.98 million shares, respectively.
In the second spot on our list of the top five large-cap stock picks of John Griffin is Actavis plc (NYSE:ACT). Blue Ridge Capital reported selling 159,000 shares during the first quarter, ending it with 1.47 million shares worth $436.31 million. On June 4, Sumant S. Kulkarni, an analyst from Bank of America Merrill Lynch, raised the firm’s price target on Actavis to $350 and maintained its “Buy” rating on the stock. He believes that the growth potential of Actavis is not fully priced in, therefore the stock might represent a great buying opportunity, despite the stock having increased by over 16% since the beginning of the current year. Billionaire Andreas Halvorsen holds one of the largest stakes in Actavis plc (NYSE:ACT), consisting of 6.11 million shares valued at $1.82 billion.
Griffin did not change his equity stake in Walgreens Boots Alliance Inc. (NASDAQ:WBA) during the first quarter, with it still amounting to 4.58 million shares, valued at $387.83 million. Walgreens’ shares have increased by 11% year-to-date and might still move higher in the upcoming months as the company has undertaken a beautification project with the acquisition of Alliance Boots. A number of former executives of Alliance Boots joined the management team of the largest U.S. drugstore chain and as a result, the company is recreating its stores so as to achieve a more appealing cosmetics area with a wider portfolio of products. Specifically, the company’s Boots No. 7 skincare line is expected to deliver strong performance, as it has been successfully dragging customers to its European stores. Andreas Halvorsen’s Viking Global is also one of the largest shareholders of Walgreens Boots Alliance Inc. (NASDAQ:WBA), holding a stake of 14.60 million shares valued at $1.24 million.
Blue Ridge Capital kept its position in Priceline Group Inc. (NASDAQ:PCLN) unchanged during the first quarter at 291,000 shares that are worth $338.77 million as of March 31, 2015. Even though the Chief Executive Officer of Priceline, Darren Huston, has recently announced that the company will mainly focus on developing its current businesses rather than on making new acquisitions, it can be seen that Priceline has been expanding quite substantially lately. Only last year, Priceline Group made five new acquisitions intended to assist the development and growth of the company. Thus, it seems that the company will only benefit from the above-mentioned decision, as it will have more time now to fully integrate the newly-acquired companies. The stock is up nearly 3% since the beginning of 2015. Stephen Mandel’s Lone Pine Capital owns 1.33 million shares of Priceline Group Inc. (NASDAQ:PCLN), making it the largest shareholder in the company among the funds we track.
Finally, Blue Ridge Capital reduced its position in Thermo Fisher Scientific Inc. (NYSE:TMO) by 165,000 shares, reporting a stake of 1.95 million shares worth $261.96 million at the end of the most recent quarter. Shares of Thermo Fisher have increased by over 3% year-to-date and it has been riding a notable uptrend lately. The world leader in serving science has recently announced that it will pay a quarterly cash dividend of $0.15 per share on July 15, 2015. Therefore, the dividend is a clear sign that the company is in good financial health and doesn’t foresee any serious troubles along its way. Larry Robbins’ Glenview Capital is the largest investor in Thermo Fisher Scientific Inc. (NYSE:TMO) in our database, owning 6.91 million shares valued at $928.39 million.
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