In May, billionaire Richard Chilton’s Chilton Investment Company filed its 13F for the first quarter of 2013 with the SEC, disclosing many of its long equity positions as of the end of March. While the information in 13Fs is a bit old by the time it is released, we think there are still a couple of ways for investors to use them in their decision making process. For one, we’ve actually 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 more strategies are possible as well. We can also screen individual managers’ picks for stocks satisfying a number of criteria, including moderate to high dividend yields. Read on for our thoughts on the five largest holdings in Chilton’s 13F portfolio with dividend yields of 3% or higher or see the full list of stocks the fund reported owning.
Chilton and his team cut their stake in McDonald’s Corporation (NYSE:MCD) by over 30% but still owned over 530,000 shares at the beginning of April. At current prices the quick service restaurant yields 3.1%, and its valuation of 18 times trailing earnings represents a considerably discount to where many of its peers trade. However, revenue and earnings at McDonald’s Corporation (NYSE:MCD) were essentially flat in the first quarter of 2013 versus a year earlier. We’d note that the stock’s beta is only 0.3. The Bill and Melinda Gates Foundation Trust owned almost 10 million shares according to its own 13F (check out more stocks the trust owns).
Potash Corp./Saskatchewan (USA) (NYSE:POT), a fertilizer manufacturer which recently increased its quarterly dividend payment, was another of Chilton’s dividend stock picks. The annualized yield is now 3.5%. Potash Corp./Saskatchewan (USA) (NYSE:POT) delivered double-digit growth rates on both top and bottom lines in its most recent quarter compared to the same period in the previous year, and with a trailing P/E of 16 we think that it is worth considering- future growth at similar rates would leave the stock undervalued. Our database shows Phil Gross and Robert Atchinson’s Adage Capital Management owning over 10 million shares at the end of the quarter.
Diversified consumer products company Unilever N.V. (ADR) (NYSE:UN) also makes our list, with the filing disclosing ownership of over 1 million shares. Unilever N.V. (ADR) (NYSE:UN) has also managed to increase both its revenue and earnings going by recent reports, and also carries a dividend yield of 3.5%. At a market cap of $110 billion, the trailing and forward P/E multiples clock in at 19 and 16 respectively. Gardner Russo & Gardner was the largest shareholder in Unilever out of the investors we track, with 8.9 million shares in its portfolio (research more stocks Gardner Russo & Gardner likes).
Chilton was a buyer of Wells Fargo & Co (NYSE:WFC) between January and March, increasing his stake to a total of 1.1 million shares. The bank is known as the largest holding in Berkshire Hathaway’s portfolio, as Warren Buffett and his team have liked the stock as well (see Buffett’s stock picks). Wells Fargo & Co (NYSE:WFC) is valued at a substantial premium to the book value of its equity, with a P/B ratio of 1.4, but management has been able to deliver enough earnings out of these assets that the earnings multiples are competitive with those of other large banks. At current prices and dividend levels, Wells Fargo’s dividend yield is 3%.
Disclosure: I own no shares of any stocks mentioned in this article.
