Harvard Management Co, run by Yale alum Jane Medillo, is the wholly-owned subsidiary of Harvard University and is one of the 11,000 funds that help manage Harvard’s working capital, pension and massive $32 billion endowment fund. Harvard’s endowment dwarfs the $17 billion endowment fund for Princeton, and $19 billion for Yale. With over $1 billion under her management in the equity portfolio alone, Medillo seems to prefer consumer goods and technology stocks, according to her latest 13F filing with the SEC. Because hedge fund sentiment has been a very, very good tool to beat the market, it’s worth, then, taking a look at Medillo and her team’s top five favorite stocks.
Let’s get started.
Worth 2.5 million shares and 5% of the equity portfolio, Pebblebrook Hotel Trust (NYSE:PEB) takes the top position. The hotel investment company, structured as a REIT, recently announced that it would pay a dividend of $0.16 per share, an increase of 33% from the fourth quarter dividend. The stock also benefits from being a REIT, as well as a 33% increase in revenue for the fourth quarter, which helped boost the company’s bottom line 75% to $26.1 million (qoq). Pebblebrook Hotel Trust (NYSE:PEB) is trading in the $25 to $26 range, which is at the top end of its 52-week spread of $19.17 to $26.07. It remains to be seen if the stock can arrange a breakout, but it seems that at least one mega-fund thinks it can.
Second of this top five is Ralcorp Holdings, Inc (NYSE:RAH), a new addition to the fund worth 520,000 shares initially. On January 29th, ConAgra Foods, Inc. (NYSE:CAG) announced its acquisition of Ralcorp Holdings, Inc (NYSE:RAH) for $90.00 per share. This makes the combined company one of the largest packaged food players in North America. At the end of 2012, Ralcorp Holdings, Inc (NYSE:RAH) closed at $89.65, so if Harvard Management bought its shares in Ralcorp Holdings, Inc (NYSE:RAH) on the last day of the quarter, their profit at the time of the sale would have amounted to a cool $182K.
At number three is Warnaco Group Inc (NYSE:WRC), another new addition to the Harvard fund last quarter with 591,261 shares, and yet another buyout play. Warnaco Group Inc (NYSE:WRC) was bought in February by PVH Corp (NYSE:PVH), owner of the Calvin Klein and Tommy Hilfiger brands, for $2.9 billion, which comes to $51.75 per share. In other words, this was 0.18 of a share in PVH Corp (NYSE:PVH) stock for each share of Warnaco Group Inc (NYSE:WRC). So, given the terms of the deal, each share of Warnaco Group Inc (NYSE:WRC) was worth about $73.44. If Medillo bought WRC on December 31st of last year, she would have made approximately $1,105,658 on the deal.
Number four is Teavana Holdings, Inc. (NYSE:TEA), yet another new position at 2.4 million shares and another acquisition, this time by Starbucks Corporation (NASDAQ:SBUX) for $620 million. The pairing of the tea-seller and coffee behemoth seems as natural as if Nike bought sock-maker Hanes. Given recent acquisitions by Starbucks Corporation (NASDAQ:SBUX) for bakery chain La Boulange and juice maker Evolution, it seems obvious that Starbucks Corporation (NASDAQ:SBUX) is branching out from just coffee. For shareholders of Teavana Holdings, Inc. (NYSE:TEA), the deal gives then $15.50 in cash for each share.
Last but not least, at 3.57% of the Harvard portfolio is Hudson City Bancorp, Inc. (NASDAQ:HCBK). The stock has traded in a fairly narrow range since the start of the year, but has still managed to hold onto last summer’s rally following the announcement that Hudson City Bancorp, Inc. (NASDAQ:HCBK) will merge with M&T Bank Corporation (NYSE:MTB). Under the terms of the deal, each Hudson City Bancorp, Inc. (NASDAQ:HCBK) share will receive consideration valued at 0.084 of an M&T share in either cash or stock. Hudson City Bancorp, Inc. (NASDAQ:HCBK) last traded at $8.51, while M&T Bank was last trading almost $1 higher at $101.73.
Jane Medillo clearly has a knack for finding companies that are ripe for buy-outs and mergers, which has added considerably to Harvard Management’s net worth. Of the top five stocks in the portfolio, four have been bought out or merged during the first quarter of 2013 and three were new additions to the fund. Looking at the other positions in the fund, there are at least three others than are either buyout candidates (Kayak Software Corp. (NASDAQ:KYAK) by Priceline.com Inc (NASDAQ:PCLN)) or have already been purchased, like Epoch by TD Bank, and Spartech Corporation (NYSE:SEH) by PolyOne Corporation (NYSE:POL).
Because of Medillo’s track record, retail investors should always pay attention; learn how much some readers have made by mimicking hedge fund sentiment.
Disclosure: none
