Clifford Fox Adds Microsoft, Kellogg, Adobe, More to His Portfolio

Columbus Circle Investors (CCI), which is owned by Principal Global Investors and managed by Clifford G. Fox has a four-step process that it uses to identify companies with strong fundamentals that could potentially exceed investors’ expectations in terms of returns. Firstly, 6-to-10 leading indicators are identified for a company based on economic and secular trends, as well as industry and company specific factors. This is followed by examining consensus expectations for the company. Thirdly, companies exceeding these expectations are bought and those that fall short are either avoided or sold. Lastly, importance is placed on the construction of a diversified portfolio. In order to help retail investors benefit from the rigorous process of the fund, we have identified the top new additions to Columbus Circle’s equity portfolio during the first quarter, which surely exceed its stringent criteria.

We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see more details here).

#5 Adobe Systems Incorporated (NASDAQ:ADBE)

 – Shares Owned by CCI (as of March 31): 765,500

 – Value of Holding (as of March 31): $71.81 Million

The fund’s newly initiated stake in Adobe represented about 0.64% of Columbus Circle’s equity portfolio as of March 31. Although Adobe Systems Incorporated (NASDAQ:ADBE)’s stock  is down by 0.30% year-to-date, it recently reached an all-time high after the company managed to beat both the top and bottom-line estimates with its first quarter financial results. After taking part in Livefyre’s $47 million Series D round of funding early last year, Adobe Systems Incorporated (NASDAQ:ADBE) announced the acquisition of the audience-engagement firm yesterday, with the firm being incorporated into Adobe Experience Manager. Ray Carroll‘s Breton Hill Capital also initiated a stake in Adobe during the first quarter, of some 17,600 shares valued at $1.65 million.

#4 Michael Kors Holdings Ltd (NYSE:KORS)

 – Shares Owned by CCI (as of March 31): 1.52 Million

 – Value of Holding (as of March 31): $86.84 Million

Considering that Michael Kors Holdings Ltd (NYSE:KORS)’s stock has skyrocketed by over 30% this year, CCI appears to have hit a home run so far with this portfolio addition. David Einhorn‘s Greenlight Capital is another fund that supported the company by going long during the second quarter of last year, when most investors thought it was a fad. Mr. Einhorn further stressed the investment in his recent first quarter investor letter as well. The music has changed now among analysts, with Piper Jaffray recently upgrading the company to ‘Overweight’ from ‘Buy’ and boosting its price target on it $67, which suggests upside potential of 26%. Judging by its recent channel checks and its proprietary teenager survey, Piper Jaffray believes that the firm hasn’t lost popularity or market share and now has more stable footing on a global scale.

We’ll check out three more stocks that Mr. Fox recently added to his firm’s equity portfolio on the next page.

#3 Kellogg Company (NYSE:K)

 – Shares Owned by CCI (as of March 31): 1.18 Million

 – Value of Holding (as of March 31): $90.55 Million

Moving on, CCI’s Kellogg Company (NYSE:K) holding amassed about 0.81% of its portfolio value as of March 31. The $27 billion manufacturer of ready-to-eat cereal and convenience foods has seen its stock price rise by 6.34% so far this year. Kellogg recently announced that it will be launching two rather unconventional pastries that feature soda flavors inspired by A&W Root Beer and Crush Orange sodas. Despite a tough 2015 which saw revenue decline by 7.2% to $13.5 billion in the face of foreign exchange headwinds, Kellogg Company (NYSE:K)’s shares are up by more than 20% over the last 12 months. BlueCrest Capital Management, which is led by Michael Platt and William Reeves, appears to be bearish on Kellogg’s future prospects, as the fund slashed its holding by 94% during the first trimester to just 4,800 shares.

#2 Procter & Gamble Co (NYSE:PG)

 – Shares Owned by CCI (as of March 31): 1.63 Million

 – Value of Holding (as of March 31): $133.78 Million

Columbus Circle’s Procter & Gamble Co (NYSE:PG) holding represented about 1.19% of its portfolio at the end of March. The $218 billion provider of consumer packaged goods recently posted its third quarter of fiscal year 2016 financial results, which amounted to earnings of $0.86 per share on revenue of $15.76 billion, beating EPS estimates by $0.04, but missing revenue estimates by $50 million. P&G is undergoing a transformation in its product portfolio as part of a plan to divest about 100 brands so that it can focus on 80-to-90 fast growing ones. The sale of the company’s Duracell business was one of the steps in this direction. Another major concern for P&G has been its struggling beauty segment, which accounts for about 24% of the company’s top line, but has been showing flat or declining sales for the last six quarters. Ken Fisher‘s Fisher Asset Management seems to be a believer in the company’s direction, having inched up its Procter & Gamble Co (NYSE:PG) holding by 1% during the first three months of this year to over 8.00 million shares.

#1 Microsoft Corporation (NASDAQ:MSFT)

 – Shares Owned by CCI (as of March 31): 3.19 Million

 – Value of Holding (as of March 31): $176.27 Million

Lastly, CCI’s fresh bet on the $397 billion tech giant has not yet fared so well, as shares of Microsoft Corporation (NASDAQ:MSFT) are down by more than 10% so far this year. The company slightly missed earnings expectations with its third quarter of fiscal year 2016 results, owing to a weak PC market and currency headwinds, which played a major part in the stock’s year-to-date slide. However, investor apprehensions might have been overplayed considering that the company is transitioning to cloud-based services, which seem to be doing pretty well, as evidenced by a year-over-year increase of 120% in Azure revenue, in constant currency terms. Locust Wood Capital Advisers, which is managed by Stephen J. Errico, also initiated a stake in Microsoft Corporation (NASDAQ:MSFT) during the January-to-March period, consisting of some 437,500 shares.

Disclosure: None