Does Greenhaven Associates Have A Winner (Or Five) In These Five Stock Picks?

The ugly third quarter is already behind us, and the new round of 13F filings has kicked off. Considering the disappointing stock returns of the latest quarter, it might worthwhile to take a look at which stocks hedge fund managers put faith in for the current three-month period and the upcoming quarters. Moving on to the underlying purpose of this article, we will discuss the top five holdings of Edgar Wachenheim’s Greenhaven Associates held as of the end of the third quarter. It is worth pointing out that the value-oriented investment firm sold-off two positions, reduced its holdings in seven stocks, and also increased its positions in ten stocks during the latest quarter, which might suggest that the recent correction has forced the firm to undergo a more serious re-balancing process. In the meantime, the portfolio value of Greenhaven Associates added up to $5.01 billion at the end of the quarter, compared to $5.47 billion registered at the end of the previous one. Let’s move on to the top five stock picks of Greenhaven Associates, which will be arranged in decreasing order.

But why do we track hedge fund activity? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect their activity. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period hedge funds’ top small-cap stocks edged the S&P 500 index by double digits annually. The 15 most popular small-cap stock picks among hedge funds also bested passive index funds by around 53 percentage points over the 3 year period beginning from September 2012 (read the details here).

#5 United Parcel Service Inc. (NYSE:UPS)

Shares Owned by Greenhaven Associates (as of September 30): 4.63 million shares

Value of Holding (as of September 30): $456.85 million

United Parcel Service Inc. (NYSE:UPS) represents the fifth-largest holding of Greenhaven Associates at the end of the third quarter, accounting for 9.12% of the firm’s portfolio. The investment firm decreased its position in the company by 184,285 shares during the latest three-month period, when the shares of the package delivery company gained nearly 3%. The company is expected to release its third-quarter results on October 27, but market participants should be more focused on the upcoming holiday season. Just recently, United Parcel Service announced its plans to hire up to 95,000 temporary workers so as to tackle the busy holiday season this year. Let us remind you that the company has encountered difficulties during the last two holiday seasons, which impacted its financial results for the fourth quarter. Adage Capital Management, founded by Phill Gross and Robert Atchinson, reported holding a stake of 1.07 million shares in United Parcel Service Inc. (NYSE:UPS) through the 13F filing for the June quarter.

#4 JPMorgan Chase & Co. (NYSE:JPM)

Shares Owned by Greenhaven Associates (as of September 30): 9.00 million shares

Value of Holding (as of September 30): $549.03 million

Greenhaven Associates boosted up its position in JPMorgan Chase & Co. (NYSE:JPM) during the September quarter by 48,995 shares even though the stock struggled amid high volatility and uncertainty in stock markets. In fact, the shares of the global financial services firm lost 9% during the recent quarter, but are flat year-to-date. A little over a week ago, the company released its financial results for the third quarter, posting earnings per share of $1.32 on revenues of $23.54 billion. JPMorgan Chase & Co. has missed analysts’ expectations on both EPS and revenue, mainly owing to “challenging global environment” and the low interest rate environment. Aside from Greenhaven Associates, Boykin Curry’s Eagle Capital Management represents another top stockholder of JPMorgan Chase & Co. (NYSE:JPM) with 10.68 million shares as of June 30.

#3 Goldman Sachs Group Inc. (NYSE:GS)

Shares Owned by Greenhaven Associates (as of September 30): 3.32 million shares

Value of Holding (as of September 30): $577.45 million

Greenhaven Associates remained bullish on Goldman Sachs Group Inc. (NYSE:GS) during the third quarter and enlarged its previously-disclosed position by 174,185 shares. Goldman Sachs did not have a great quarter in terms of stock performance either, with its shares losing slightly more than 16% during the three-month period. It seems that the lower-than-expected financial results of the investment banking and securities company for the third quarter were overlooked by the market, as bullish investors have been driving up the company’s share price recently. Goldman Sachs posted earnings per share of $2.90 on operating revenues of $6.9 billion. Warren Buffett’s Berkshire Hathaway is the largest stockholder of Goldman Sachs Group Inc. (NYSE:GS) among the hedge funds monitored by Insider Monkey, holding a 12.63 million-share stake at the end of June.

#2 FedEx Corporation (NYSE:FDX)

Shares Owned by Greenhaven Associates (as of September 30): 4.52 million shares

Value of Holding (as of September 30): $651.29 million

FedEx Corporation (NYSE:FDX) represented Greenhaven Associates’ top holding at the end of the second quarter, but its disappointing stock performance during the three-month period (the shares of FedEx lost 15.36%) put the stock on the second spot of our list. However, the investment firm put more faith in the stock, as it increased its position in the company, which now accounts for roughly 13% of the firm’s portfolio, by 25,445 shares during the September quarter. On Tuesday, FedEx and TNT Express, which FedEx agreed to purchase in an all-cash deal for $8 per share back in April, issued a statement claiming that the European Commission does not have any objections to the $4.8 billion deal. The combined entity is set become the second-largest delivery services business in Europe. Mason Hawkins’ Southeastern Asset Management represents the top shareholder of FedEx Corporation (NYSE:FDX) within our database, owning 5.13 million shares.

#1 Lowe’s Companies Inc. (NYSE:LOW)

Shares Owned by Greenhaven Associates (as of September 30): 9.84 million shares

Value of Holding (as of September 30): $678.33 million

Lowe’s Companies Inc. (NYSE:LOW) is the largest-holding of Greenhaven Associates at the end of the third quarter even though the investment firm trimmed its position by 281,648 shares during the recent quarter. The shares of the home improvement retailer gained 3.35% in the third quarter and have advanced an additional 6% since September 30. Just recently, analysts at Credit Suisse rated the stock at “Outperform” and raised the price target to $80 from $70, citing confidence in the strategic direction of the company. The freshly-updated price target yields an upside potential of nearly 10%. Stephen Mandel’s Lone Pine Capital is the second-largest equity holder of Lowe’s Companies Inc. (NYSE:LOW) among the hedge funds tracked by our team, tailing Greenhaven Associates. The Triger Cub reported owning 7.05 million shares through the 13F filing for the June quarter.

Disclosure: None