ClearBridge’s Top Stock Picks for Early 2016

#3 Calpine Corporation (NYSE:CPN)

– Shares Owned by ClearBridge (as of December 31): 11.38 million

– Value of Holding (as of December 31): $164.8 million

Though shares of Calpine Corporation (NYSE:CPN) ended the fourth quarter on a flat note, the stock jumped two spots in ClearBridge’s portfolio during the quarter, as the firm increased its stake in the company by 18%. Due to weak power prices and wildfires in California, the power generation company reported a loss of $0.13 per share on revenue of $1.49 billion for the fourth quarter. For the same quarter of the prior year, the company reported EPS of $0.54 on revenue of $1.94 billion. On March 8, analysts at Argus downgraded Calpine Corporation (NYSE:CPN) to ‘Hold’ from ‘Buy’. Siddharth Thacker‘s Signpost Capital held 1.28 million shares of Calpine Corporation as of December 31.

#2 Citigroup Inc (NYSE:C)

– Shares Owned by ClearBridge (as of December 31): 3.4 million

– Value of Holding (as of December 31): $176 million

Citigroup Inc (NYSE:C) continued to remain one of ClearBridge’s five largest equity holdings at the end of December. Though ClearBridge increased its stake in the bank by 3% during the fourth quarter, other hedge funds weren’t quite as bullish, as the overall ownership of the stock among the hedge funds in our database declined by 15 to 106 during the same period. A decline in the broader market coupled with fears of Citigroup Inc (NYSE:C) having high exposure to loans in the energy sector has resulted in the bank’s stock losing 20% of its value since the beginning of 2016. For its fiscal year 2016, Citigroup expects equity trading revenue to fall by 15% and investment banking revenue to decline by 25%. On March 9, analysts at Credit Suisse lowered their price target on the stock to $55 from $57, while keeping their rating on it unchanged at ‘Outperform’. Billionaire Ken Fisher‘s Fisher Asset Management increased its stake in Citigroup by 2% to 12.03 million shares during the fourth quarter.

#1 Microsoft Corporation (NASDAQ:MSFT)

– Shares Owned by ClearBridge (as of December 31): 3.78 million

– Value of Holding (as of December 31): $210 million

Even though ClearBridge reduced its stake in Microsoft Corporation (NASDAQ:MSFT) by 16% during the October-to-December period, the company jumped a spot in the fund’s equity portfolio to become its largest equity holding at the end of December. After rising by almost 25% during the final quarter of 2015, shares of Microsoft Corporation (NASDAQ:MSFT) have fallen by over 6% so far this year. Nevertheless, most analysts feel that the company is one of the best bets that investors can make in the technology sector right now, as it is relatively stable financially, sports an annual dividend yield of almost 3% and has a cloud platform, Azure, that is growing at an exponential rate. During the fourth quarter of 2015, Amazon’s AWS maintained its position as the leader in the cloud space with over 30% market share, however, it was Microsoft Corporation’s Azure which saw the top year-over-year growth during the period, at 124%. Donald Yacktman‘s Yacktman Asset Management reduced its holding in Microsoft by one-fourth to 12.93 million shares during the fourth quarter.

Conclusion: None