Infosys Ltd ADR (INFY), Teva Pharmaceutical Industries Ltd (ADR) (TEVA), Marathon Petroleum Corp (MPC): Three Intriguing Plays This Hedge Fund Is Focusing On

Editor’s Note: Related tickers: Infosys Ltd ADR (NYSE:INFY), Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA), Marathon Petroleum Corp (NYSE:MPC), VIVUS, Inc. (NASDAQ:VVUS), Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), BHP Billiton Limited (ADR) (NYSE:BHP), Tesoro Corporation (NYSE:TSO)

At Insider Monkey, we’ve reported on quite a bit of first quarter 13F filings thus far, but one hedge fund we haven’t taken a look at is Bernard Horn’s Polaris Capital Management. Established in 1995, Polaris is an equity-focused investment firm with a penchant for value, and it recently reported that it manages over $4 billion in assets. It’s always important to track hedge fund sentiment because if you know where to look, you have the potential to beat the market. Let’s take a look at Horn and Polaris’ top five equity positions.

Top dog

The largest equity position in terms of value is in Infosys Ltd ADR (NYSE:INFY), where the hedge fund holds a $95 million stake, consisting of 1,762,750 shares. Polaris was bullish on the company in Q1, raising the holding from 1.6 million shares worth $68.6 million reported at the end of December. The IT consulting and technology company has had an up and down 2013, with shares plummeting 20% on April 12th following a disappointing fourth quarter and below-average FY2013 guidance. The company expects its revenue to grow by 6-10% over the current fiscal year, missing the 12% rate forecasted by analysts, and even worse, the sell-side expects EPS to be stagnant this year.

It’s possible that Horn and Polaris are still bullish on Infosys Ltd ADR (NYSE:INFY), as it trades at attractive multiples—14 times forward earnings and a 0.98 PEG—but one could argue that these metrics are meaningless in a period of declining growth. The IT consulting marketplace as a whole doesn’t looking mind-blowingly attractive, with the S&P citing “a hazy outlook for the global economy” as a key reason why companies like Infosys Ltd ADR (NYSE:INFY) don’t face the best of prospects moving forward. Thus, it’s also quite possible that Horn and Polaris have been stung by the IT consulting industry bellwether’s fall from grace, much like most Infosys investors. Overall, we’d be cautious.

Teva

Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) is also held by Polaris and is worth $88.1 million, up from $65.4 million disclosed at the end of 2012. The quantity of Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) shares in the holding advanced to 2,220,053 shares, from 1,751,753 at the close of the prior quarter, and the stock sports a forward P/E of 7.2x and a year-to-date return of above 7%; unlike Infosys, there’s quite a bit to like about Teva’s for 2014 and beyond.

While mainstream companies like VIVUS, Inc. (NASDAQ:VVUS) and Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) get most of the hype in the pharma space, Teva’s footprint in the generic drug marketplace should not be overlooked. In the same economic rationale as generic foods becoming more popular post-recession, Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA)’s generics have seen increased demand in the past few years. What’s more, the company’s staple of proprietary products—multiple sclerosis drug Copaxone, the duo of Provigil and Nuvigil for sleep disorders, and Parkinson’s drug Azilect, to name a few—are key strengths.

From a valuation standpoint, shares of Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) trade at a ridiculously low 7 times forward earnings, and while EPS did shrink by an average of 1% annually over the past half-decade, future growth is expected to pick up. Wall Street forecasts Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) will expand its bottom line by 7.1% a year through 2017, and if higher-margin products like Copaxone can see extended shelf life post-patent via changes in dosage requirements, there is upside to this figure.