Curtis Macnguyen founded Ivory Capital in 1998 after five years at Siegler, Collery & Co. and after having worked in investment banking before that. Ivory runs a long/short portfolio which attempts to match much of the risk factors between its long and short holdings in order to better focus on what the fund believes will end up driving value. This approach also allows it to focus in particular on avoiding macro risks that it finds particularly concerning, such as inflation. Macnguyen’s conservatism also shows in that it looks for a 30% margin of safety compared to a stock’s intrinsic valuation- a bit high for a value investor- and insists on being able to identify a catalyst rather than assuming that in most cases the market will correct itself.
When we look at Ivory’s 13F portfolio for the third quarter of 2012, we see that the majority of the fund’s capital is invested in the technology, services, and financial sectors with a number of tech names in particular at the top of its portfolio. Read on for a quick look at Ivory’s five largest 13F stock positions by market value as of the end of the third quarter or see the fund’s full list of stock picks.
American International Group, Inc. (NYSE:AIG). The bailed-out insurer- which recently returned a profit to the Treasury- made our list of the ten most popular stocks among hedge funds in the third quarter of 2012 (see the rest of the top ten list). For an insurance company like AIG we’d be interested in considering both the earnings multiple and the price/book ratio; at about half the book value of its equity and only 10 times forward earnings estimates, we think that the market is putting too conservative a valuation on the stock.
T. Boone Pickens and Macnguyen agreed on an energy stock:
Microsoft Corporation (NASDAQ:MSFT). Macnguyen and his team cut their stake in Microsoft during the third quarter but still owned 3.5 million shares at the end of September. Platinum Asset Management, which is managed by billionaire Kerr Neilson, owned almost 11 million shares and this made Microsoft the fund’s largest 13F position by market value (check out Platinum’s stock picks). Microsoft’s forward P/E is only 8 but that is highly dependent on how strong Windows and Office sales are; it’s probably best to avoid the stock until solid figures come in.
EOG Resources, Inc. (NYSE:EOG). The $34 billion market cap oil and gas company was another of Ivory’s top picks with a position of about 740,000 shares. Billionaire oilman T. Boone Pickens, who invests some of his wealth in stocks, had about 70,000 shares in his own portfolio (research more stocks Pickens likes). EOG’s revenue was up nicely in the third quarter of 2012 versus a year earlier, though net income fell 34%. The stock carries trailing and forward P/Es of 28 and 20, respectively.
Google Inc (NASDAQ:GOOG). Ivory owned about 90,000 shares of Google Inc (NASDAQ:GOOG). The company’s bottom line has been negatively affected by the acquisition of Motorola Mobility Holdings. While we would expect that over time Google Inc (NASDAQ:GOOG) will better integrate this acquisition and also grow its core advertising business, the stock trades at 23 times trailing earnings and so the market has already priced in quite a bit of growth. Billionaire Stephen Mandel’s Lone Pine Capital cut its stake but still had over $800 million invested in the stock.
