13F filings are released several weeks after the end of a quarter and disclose many of the long equity positions held by a hedge fund or other major investor. Since 13D and 13G filings only occur when a fund large percentage stake in a company- which in itself generally excludes large-cap and mega-cap stocks- 13Fs are the most comprehensive picture of where a fund’s money is invested. Retail investors should not blindly follow any fund managers, but we like to think of 13Fs as free- albeit slightly stale- investment ideas. As with any investment ideas, it’s best to do more research on these companies before making any decisions. Read on for our quick take on five stocks which value investor Edgar Wachenheim’s Greenhaven Associates reported owning at the beginning of the year and compare them to previous filings.
Greenhaven’s top pick was home improvement store Lowe’s Companies, Inc. (NYSE:LOW), with over 12 million shares in its portfolio at the end of December. Lowe’s is up 42% in the last year, partly due to optimism about housing and construction. It trades at 23 times trailing earnings, which we’d generally consider high for a value investment, though the company did report sharp earnings growth in its most recent quarterly report versus a year earlier. Billionaire Ken Griffin’s Citadel Investment Group increased the size of its own position in Lowe’s during the third quarter of 2012 (see Griffin’s stock picks).
Wachenheim and his team also liked the shipping industry, reporting ownership of 4.5 million shares of FedEx Corporation (NYSE:FDX). The Bill & Melinda Gates Foundation Trust is another major investor in the company, with over 3 million shares as of the end of September (check out more stocks the trust is invested in). Fedex’s most recent fiscal quarter ended in November, with the company experiencing a modest increase in revenue compared to the same period in the previous fiscal year but a 12% decline in earnings. The stock has a trailing P/E multiple of 16 and a trailing EV/EBITDA multiple of 5.9x.
Three more stocks Greenhaven likes, including UPS:
Air Products & Chemicals, Inc. (NYSE:APD), an $18 billion market cap manufacturer of gases and performance materials, was another of the fund’s favorite stocks. The company has already announced its results for the December quarter, the first of its fiscal year: double-digit growth rates in both sales and net income from the first quarter of the last fiscal year. The trailing and forward P/Es are 16 and 14, respectively, and it may be worth looking into a company with that combination of value and financial performance. Diamond Hill Capital, managed by Ric Dillon, has also reported a large position in the stock. Air Products & Chemicals pays a dividend yield of almost 3%.
Drilling equipment and services company Baker Hughes Incorporated (NYSE:BHI) also was among Greenhaven’s top five picks as the fund increased its holdings to 7 million shares, up from 6.3 million shares three months earlier. The trailing price-to-earnings multiple here is 15, at about the same level as the two stocks we’ve previously discussed. We would note that Baker Hughes is tied to drilling activity, and with that in turn connected to the broader economy the stock’s beta is 1.7. William Gray’s Orbis Investment Management owned nearly 11 million shares at the end of Q3 2012 (find Orbis’s favorite stocks).
United Parcel Service, Inc. (NYSE:UPS) joined Fedex as shipping stocks among the fund’s favorite stocks. Renaissance Technologies, founded by billionaire Jim Simons, has reported adding shares in the third quarter of last year (research more stocks Renaissance was buying). UPS just announced an earnings miss for last quarter; it currently trades at 16 times what analysts had been expecting it to earn this year, and we imagine that figure would increase after revisions to sell-side guidance. Given that the current-year P/E had already been including a strong improvement on the bottom line from last year, it might be best to avoid the stock.
Disclosure: I own no shares of any stocks mentioned in this article.
