Billionaire Rob Citrone’s Biggest Q4 Moves

Billionaire Rob Citrone‘s Discovery Capital Management recently submitted its 13F filing with the Securities and Exchange Commission, revealing a U.S equity portfolio worth $8.44 billion as of December 31. Our analysis of the fund’s 13F holdings in companies worth over $1 billion shows that Discovery Capital didn’t perform very well in 2015 as its long equity positions produced a weighted average returns loss of 5.7% over that period. However, the recent filing reveals that the fund made some major moves in equities during the last quarter of 2015, resulting in its portfolio experiencing a quarterly turnover of over 100% during that time. In this post, we are going to focus on the five stocks in which the fund made its biggest moves going into 2016.

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Yum! Brands, Inc. (NYSE:YUM)

– Shares Owned by Discovery Capital Management (as of December 31): 2.2 million

– Value of Holding (as of December 31): $160.87 million

Let’s begin with Yum! Brands, Inc. (NYSE:YUM), in which Discovery Capital Management increased its stake by 76% during the fourth quarter. Compared to most other stocks, Yum! Brands, Inc. (NYSE:YUM) has been fairly resilient to the weakness in equity markets this year, with it currently trading down by only 1.8% year-to-date. The stock currently trades at a reasonable valuation, with a forward price-to-earnings multiple of 17.75, in addition to sporting an attractive annual dividend yield of 2.57%. In December, executives of the company revealed that they are targeting annual earnings growth of 15% after Yum! Brands, Inc. completes the spinoff of its China unit later this year. However, analysts are skeptical about that, since same-store sales at Pizza Hut declined by 8% year-over-year last quarter and were down by 4% for the full 2015 year. Adam Weiss‘ Stillwater Investment Management initiated a stake in Yum! Brands during the fourth quarter, purchasing 318,900 shares.

Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA)

– Shares Owned by Discovery Capital Management (as of December 31): 2.96 million

– Value of Holding (as of December 31): $197.18 million

Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) was a new addition to Discovery Capital Management’s equity portfolio during the fourth quarter. Due to increasing competition faced by the company’s bestselling drugs, it recently reported mixed earnings results for the fourth quarter. While analysts had projected the company to report EPS of $1.29 on revenue of $4.83 billion for the quarter, it reported EPS of $1.28 on revenue of $4.88 billion. For the full 2015 year, revenue from both the generics and specialty drugs segments of the company suffered year-over-year declines. Revenue from specialty drugs declined to $5.2 billion from $5.6 billion, while revenue from the generic segment declined to $9.5 billion from $9.8 billion. Larry Robbins’ Glenview Capital increased its holding in the company by 43% to almost 6.00 million shares during the October-to-December period.

Charles Schwab Corp (NYSE:SCHW)

– Shares Owned by Discovery Capital Management (as of December 31): 9.04 million

– Value of Holding (as of December 31): $297.70 million

Considering that Charles Schwab Corp (NYSE:SCHW)’s stock has fallen by nearly 25% so far this year, it seems Discovery Capital Management move to increase its stake in the company by 175% during the fourth quarter isn’t looking wise at the moment. The large decline caused the company’s trailing price to earnings multiple to fall below 24.00 recently, the lowest it has been in the past two-and-a-half years. For the fourth quarter, the company reported EPS of $0.28 on revenue of $1.69 billion, compared to EPS of $0.25 on revenue of $1.55 billion that it reported for the same quarter of the previous year. On February 19, analysts at Barclays reiterated their ‘Buy’ rating on the stock, but lowered their price target on it to $31 from $32. John Armitage‘s Egerton Capital Limited also increased its stake in the company during the fourth quarter, by 24% to nearly 9.5 million shares.

Pfizer Inc. (NYSE:PFE)

– Shares Owned by Discovery Capital Management (as of December 31): 14.58 million

– Value of Holding (as of December 31): $470.83 million

Moving on, owing largely to Discovery Capital Management increasing its stake in the company by 51%, Pfizer Inc.(NYSE:PFE) jumped two places quarter-over-quarter to become the fund’s second-largest equity holding as of the end of December. Shares of Pfizer Inc.(NYSE:PFE) have been on a consistent downtrend since it announced its $160 billion acquisition of Allergan plc Ordinary Shares (NYSE:AGN) last November and are currently trading down by over 7% in 2016. The FDA recently approved Pfizer.’s breast cancer medication IBRANCE for extended use, which several analysts are viewing as a major positive development for the company. While regulators are concerned about the Pfizer/Allergan deal because it will result in a tax loss for the U.S after Pfizer changes its domicile to Ireland, analysts are buoyant about it, since the drug pipelines of the two companies have very little overlap.

Alibaba Group Holding Ltd (NYSE:BABA)

– Shares Owned by Discovery Capital Management (as of December 31): 10.60 million

– Value of Holding (as of December 31): $861.54 million

Amid a 37.8% rise in Alibaba Group Holding Ltd (NYSE:BABA)’s stock during the fourth quarter, Discovery Capital Management increased its stake in the company by 62%. The slump in the Chinese stock market this year has caused several Chinese companies to lose a lot of their value, however Alibaba Group Holding Ltd (NYSE:BABA)’s stock has fared much better in comparison, with a year-to-date loss of only 14.67%. Following the decline, Alibaba Group Holding Ltd (NYSE:BABA) currently trades at a miniscule forward price-to-earnings multiple of 3.12, which analysts believe is abysmally low for a growing tech company centered in a market that is still growing itself by considerably more than developed markets, even if that growth is beginning to slow. In its latest 13F filing, Alibaba Group Holding Ltd disclosed that it owned 33 million shares of U.S deal site Groupon (NASDAQ:GRPN) at the end of December. This has raised speculation among investors that the former is planning to acquire the latter. Daniel S. Och‘s OZ Management reduced its stake in Alibaba by 76% to 1.78 million shares during the October-to-December period.

Disclosure: None