Betting on banking
Other keys for the company include the dwindling of its legacy problem asset portfolio, Citi Holdings. Citi Holdings assets decreased 31% from the end of 2011 to 2012, and made up only 8% of the bank’s total assets at the end of 2012.
Citigroup Inc. (NYSE:C) commands sizable interest from major hedge funds, with a total of 118 hedge funds long the stock. This includes the top hedge fund owner by shares, Pzena Investment Management, with a $397 million position, and billionaire David Tepper of Appaloosa Management, who has a $376 million position (see Appaloosa’s top picks).
Another bank bet is Morgan Stanley (NYSE:MS) ; Bacon added Morgan to its portfolio last quarter. Earlier this year, Morgan Stanley (NYSE:MS) received approval to acquire the remaining 35% stake in Morgan Stanley Wealth Management (MSWM), a joint venture between Morgan Stanley (NYSE:MS) and Citi-Smith Barney. With control of MSWM, Morgan will have one of the largest retail platforms.
Although Morgan Stanley (NYSE:MS) saw a 19% decline in revenue in 2012, the bank is expected to rebound nicely, growing some 24% in 2013, driven by a focus on global wealth management, which accounted for over 50% of 2012 revenue, up from 30% in 2007.
Morgan Stanley (NYSE:MS) also appears to be rather cheap, trading at 11 times earnings, while the industry trades close to 19 times. The bank also has a price to book of only 0.7, a 56% discount to the 1.6 industry average.
Bet on Big Blue
Bacon added heavily to a few of his key positions last quarter.
The first of these is International Business Machines Corp. (NYSE:IBM) , in which Bacon’s fund upped its shares owned by 3,400%, making the stock the fund’s 10th largest holding.
International Business Machines Corp. (NYSE:IBM) managed to post first quarter earnings per share of $3.00, compared to $2.78 for the same quarter last year and just below consensus. Revenue is expected to grow a mere 0.5% in 2013. Weak demand remains a big concern, with higher-margin software deals slipping during the first quarter year-over-year.
However, growth in emerging markets should aid revenue, as well as margin expansion from higher-margin software. IBM does pay investors a dividend yield of over 1.5%. IBM counts billionaire Warren Buffett as its top hedge fund shareholder with over 68 million shares (check out Buffett’s cheap stock picks).
Anteing up on Sands
Bacon also added 4,800% to its Las Vegas Sands Corp. (NYSE:LVS) shares owned. This has put the stock as Moore’s 11th largest position. Las Vegas Sands owns and operates the Venetian Casino Resort, the Sands Expo and Convention Center and the Palazzo Resort Hotel in Las Vegas, as well as the Venetian Macao Resort Hotel, Sands Macao Casino and Four Seasons Macao in Macau, China. Other initiatives include the Sands Casino Resort in Bethlehem, PA it opened in May 2009, and the development of a casino resort in Singapore.
The casino company managed to post first quarter EPS of $0.71, compared to $0.70 for the same period last year, beating consensus. The beat comes on the back of better Vegas and Singapore performance, while Macau was weak. Yet, gaming revenue growth in Macau is expected to rebound and grow at low-double digits levels for 2013, according to the Macau government statistics. Las Vegas Sands Corp. (NYSE:LVS) also pay a 2.4% dividend yield.
Adding to Auto Parts
AutoZone, Inc. (NYSE:AZO) saw Bacon up its shares owned 1000%, the stock is now Moore Capital’s 12 largest holding. This retailer of automotive parts and accessories operates over 5,000 AutoZone stores throughout most of the U.S. and in Mexico.
Analysts expect sales to grow some 6.3% in fiscal 2013, after a 6.6% advance in 2012. One key growth driver will be the opening of some 200 new stores in the U.S., Mexico and Brazil, and the acquisition of online retailer AutoAnything.
I think AutoZone, Inc. (NYSE:AZO) will perform nicely on the back of industry tailwinds. The average age of vehicles on the road is seven years, which is near all-time highs, and the pent-up demand related to maintenance and service deferrals due to the weak economy should help with top-line growth over the interim.
Bottom line
Billionaire Bacon has been snatching up a number of new stocks, including Citi and Morgan Stanley. I think both of these stocks are long-term buys based on valuation. Another big bet by Bacon, IBM, has the backing of billionaire Buffett and should also perform well on emerging market expansion. Las Vegas is another solid pick given the gaming growth in Macau, while AutoZone should perform nicely given the rising age of vehicles.
The article Billionaire Louis Bacon’s Key Moves originally appeared on Fool.com and is written by Marshall Hargrave.
Marshall is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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