Columbus Circle Investors is a Connecticut-based growth focused hedge fund and asset manager established by Donald Chiboucis in 1975. As of March 31, 2015 the fund boasted $16.3 billion in assets under management (AUM), more than 60% of which was invested in large-cap stocks. Although Columbus Circle Investors has performed quite well by investing in large- and mid-cap stocks, its real competence lies in picking small-cap stocks. During the 10 years till March 31, 2015, the fund posted annualized returns of 15.3% (net of fees) in the small-cap category, compared to 10% annualized return of the Russell 2000 growth index during the same period.
According to Columbus Circle Investors’ most recent 13F for the second quarter, the fund’s U.S. equity portfolio at the end of June was worth over $14.15 billion, 22.22% of which comprised of its 10 10 holdings. The filing also revealed that at the end of second-quarter stocks from healthcare, information technology and consumer discretionary sectors accounted for 27%, 26% and 26% respectively of Columbus Circle Investors’ equity portfolio. During the April-June period, the fund initiated a stake in 62 stocks, reduced its stake in 117 stocks, increased its stake in 91 stocks and sold out its entire holdings in 71 stocks. An important thing to note in Columbus Circle Investors’ latest 13F filing is that although the fund reduced its stake in all three of its top holdings for the first-quarter: Apple Inc. (NASDAQ:AAPL), Gilead Sciences, Inc. (NASDAQ:GILD), and PPG Industries, Inc. (NYSE:PPG). These stocks continued to remain its top three picks in the same order for the second-quarter as well. In this article we are going to focus on these companies.
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At Insider Monkey, we follow hedge funds like Columbus Circle Investors because our research has shown that their stock picks historically managed to generate alpha even though the filings are up to 45-days delayed. We used a 60-day delay in our back tests to be on the safe side and our research showed that the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. After adjusting for risk, our calculations revealed that these stocks’ monthly alpha was 80 basis points. We have also been sharing and tracking the performance of these stocks since the end of August 2012, during which time they have returned 123%, outperforming the S&P 500 ETF by over 65 percentage points (see more details here).
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Coming back to Columbus Circle Investors’ top picks. The fund reduced its stake in Apple Inc. (NASDAQ:AAPL) by 9% during the second-quarter. As of June 30, Columbus Circle Investors held almost 4.42 million shares of the company worth over $554.2 million. Shares of the world’s largest company have fallen down a cliff, down more than 10%, since it reported its quarterly results on July 21. Although EPS of $1.85 on revenue of nearly $50 billion and gross margins of 39.7% came above analysts’ estimates, experts suggest there are other reasons as to why the stock has taken such a beating following the earnings. Apple Inc. (NASDAQ:AAPL) reported iPhone unit sales of 47.4 million, which were below the estimates. Another concern that seems to be weighing down on the stock is the weakness in Chinese equity markets and China’s overall economy as the country accounts for a major share of Apple’s sales. In the last few weeks there have been rumors on the Street that Apple Inc. (NASDAQ:AAPL) might be working on becoming a wireless carrier. However, Apple refuted those rumors recently saying it has no such plans. During the first quarter of 2015, Stephen Mandel‘s Lone Pine Capital was among the most bullish hedge funds on Apple Inc. (NASDAQ:AAPL) in our database, increasing its stake by 214% to over 6.8 million shares of the company.
Moving on to Gilead Sciences, Inc. (NASDAQ:GILD), in which Columbus Circle Investors reduced its stake by 14% to over 3.56 million shares, worth$417.10 million during the April-June quarter. Shares of the biopharmaceutical company rose by almost 20% during the second quarter with most of those gains coming on the back of spectacular first-quarter results.Moreover, the company again declared better than expected second-quarter results on July 28 boosted by sales of its Hepatitis-C drugs, Solvadi and Harvoni. Its EPS for the second-quarter came in at $2.92 on revenue of $8.2 billion, compared to EPS of $2.20 on revenue of $6.5 billion it reported for the same quarter last year. On July 1, the company sought approval from the US Food and Drug Administration for a new daily regimen drug to treat 12 years or older HIV patients. In the last few months there have been concerns that Gilead Sciences, Inc. (NASDAQ:GILD) might not be able to continue its strong growth as the Hepatitis-C drugs that it relies heavily on may face significant heat from AbbVie Inc (NYSE:ABBV)’s competing drug Viekira Pak, which is also cheaper. Columbus Circle Investors was the largest shareholder of Gilead Sciences, Inc. (NASDAQ:GILD) in our database at the end of first-quarter, followed by Cliff Asness’ AQR Capital Management.
Columbus Circle Investors reduced its stake in PPG Industries, Inc. (NYSE:PPG) also by 9% over the quarter. The fund sold 285,837 shares of the company, bringing its position down to slightly over 2.71 million shares worth $311.20 million at the end of June. Shares of the Pittsburgh-based coating giant recently went through a 2-for-1 stock split on June 15. PPG Industries, Inc. (NYSE:PPG) has made a reputation as a dividend play on the Street, boasting a dividend increase every year for the last two decades. On July 7, the company announced that it has completed the acquisition of Cuming Microwave Corporation and its wholly owned subsidiary Cuming-Lehman Chambers, Inc. However, it has not revealed the financial terms of the deal. On July 16, the company reported its second-quarter earnings, which included EPS of $1.67 above analysts’ consensus estimates of $1.62. However, its shares haven’t reacted too well to the earnings, falling significantly since then. Among the hedge funds we cover, Ken Griffin‘s Citadel Investment Group was the second-largest shareholder of PPG Industries, Inc. (NYSE:PPG) after Columbus Circle Investors at the end of first-quarter.
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