We track quarterly 13F filings from hedge funds and other notable investors as part of our work researching investing strategies (we have found, for example, that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year).
13Fs can also be useful for tracking individual fund managers’ activity over time and therefore serving as a free source of initial investment ideas. Read on for our quick take on five of billionaire Michael Price‘s MFP Investors’ largest holdings as of the end of March, see the full 13F filed with the SEC, and compare his picks to those in previous filings.
MFP reported a position of 1.8 million shares in Intel Corporation (NASDAQ:INTC). Intel Corporation (NASDAQ:INTC) trades at 12 times earnings, whether we consider its trailing earnings or analyst forecasts for 2014. The reason for this valuation- which would normally place a stock in value territory- is that the company has been experiencing declines in both revenue and net income due to a shift away from PCs. Intel Corporation (NASDAQ:INTC)’s stock price is down 10% in the last year against a rising market as a result. We would note that the dividend yield comes in at 3.7% at current prices and dividend levels.
Price and his team were buying Hess Corp. (NYSE:HES) during the first quarter of 2013 and closed March with 550,000 shares in their portfolio. Oil and gas companies are generally trading at low multiples in the current market environment, and Hess Corp. (NYSE:HES) is no exception with consensus earnings for 2014 implying a forward P/E of 12. Price has publicly backed Elliott Management’s activist moves against Hess Corp. (NYSE:HES), and has suggested that the company could significantly increase shareholder value by splitting into two.
Citigroup Inc (NYSE:C) was another of MFP’s top stock picks with the filing disclosing ownership of about 800,000 shares. The past year has been very good to Citigroup Inc (NYSE:C) shareholders, with the stock rising over 80%, yet it is actually still valued at a discount to book going by the P/B ratio of 0.8. Between that and the forward earnings multiple of 10 we’re somewhat interested in Citigroup Inc (NYSE:C)as a value stock, though some other large banks might be more attractive value targets particularly considering their better record of converting their assets to net income.
The fund owned about 90,000 shares of Alleghany Corporation (NYSE:Y), the $6.7 billion market cap property and casualty insurance company, roughly even with what it had owned at the beginning of this year. It is priced right at book value, though when we look at the trailing and forward P/Es (20 and 14 respectively) we don’t get the impression that the stock is particularly cheap. Alleghany Corporation (NYSE:Y) is at least something of a defensive stocks with a beta of 0.6, but there are likely other low-beta stocks which would make for better buys.
The 13F showed MFP with 2.2 million shares of FXCM Inc (NYSE:FXCM), an online brokerage specializing in forex instruments. FXCM Inc (NYSE:FXCM)’s market capitalization is only about $540 million, but on average about 190,000 shares are traded per day and at a current price of about $15 per share that is close to $3 million in daily dollar volume. Revenue was up 21% last quarter compared to the first quarter of 2012, and earnings more than doubled; while the stock price does incorporate some future growth, analysts are bullish and as a result the five-year PEG ratio is 0.4.
FXCM Inc (NYSE:FXCM) could actually be a “growth at a reasonable price” stock then, and it might be worth looking into how sustainable its growth rates are. We’re also somewhat interested in the special situation at Hess- the stock as it is currently priced is not that cheap for its industry, but at least somewhat attractive and the breakup opportunity provides a potential upside. Citigroup Inc (NYSE:C) could also be a good value, but we do see banks such as JPMorgan Chase and Wells Fargo trading at lower multiples on their actual trailing performance and so those names might prove more intriguing even considering their premium to Citigroup Inc (NYSE:C) on a book basis.
Disclosure: I own no shares of any stocks mentioned in this article.
