Billionaire Julian Robertson’s Latest Stock Picks Include ADT

Hedge funds and other major investors are required to file 13Fs with the SEC within several weeks after the close of a quarter, and so many filers are just now reporting many of their stock positions as of the end of December 2012. Since 13Fs are public information, even though they are a little old we have been able to analyze them over time and have concluded that they can still be useful for investors. For example, the most popular small cap stocks among hedge funds have outperformed the S&P 500 by 18 percentage points per year on average (learn more about our small cap investing strategy). Of course, looking at individual 13Fs and taking a closer look at top investors’ stock picks can also be a useful technique.

Julian Robertson, the former head of Tiger Management, is a legend in the hedge fund community for both his success as an investor- which made him a billionaire- and his mentorship of several “Tiger Cubs” who now manage their own large hedge funds. He still files 13Fs and his investment activity is widely followed by investors and the financial media. Read on for some themes we noticed in his most recent 13F and compare them to previous filings.

ADT. Robertson’s largest holding was ADT Corp (NYSE:ADT), which is a spinout of Tyco International Ltd. (NYSE:TYC)’s electronic security business for residential and business customers. Many investors like to invest in spinouts because management of the new company is better able to focus on operations without having to concern themselves with the needs of the larger organization. Read more about the advantages of spinouts. ADT itself has risen 24% since it became publicly traded at the beginning of October. That has placed it at 23 times forward earnings estimates, so the market has already priced in some earnings growth. The company reported that net income was 13% higher in its most recent quarter compared to the same period in the previous fiscal year, though comparisons are difficult because of the spinout.

Selling Apple (and a little bit of Google). While Robertson still counted Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG) among his ten largest holdings, they were no longer the top two as they were at the beginning of October. His Apple stake in particular fell from about 100,000 shares to about 40,000. Apple and Google had also occupied the #1 and #2 spots, respectively, in our rankings of the most popular stocks among hedge funds in the third quarter of 2012 (see the full top ten list). It’s possible that Robertson was primarily selling Apple for issues related to that particular company, but our guess is that he expects the same issues plaguing Apple- falling margins in the tablet and smartphone markets- to impact that side of Google’s business as well. Google does have significant growth prospects from its core advertising business, and between that and its integration of Motorola Mobility Holdings the stock trades at 15 times forward earnings estimates. Apple, meanwhile, has fallen to a trailing earnings multiple of 11 even while many commentators (including, to be honest, ourselves) have insisted that it is a good value.

Robertson was buying Berkshire Hathaway: