We track quarterly 13F filings from hundreds of hedge funds and other notable investors, including billionaire Richard Chilton’s Chilton Investment Company. We’ve found that the information in these filings is useful in terms of developing investing strategies; for example, we have found that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year (learn more about our small cap strategy). We also like to screen individual funds’ filings according to various criteria, including stocks seeing recent insider buying; our analysis of studies on insider trading shows that stocks bought by insiders narrowly outperform the market (read more about studies on insider trading). Here are Chilton’s five largest positions from the end of March with at least one insider buy in the last three months (or see the full list of stocks Chilton reported owning in the filing):
The fund had Dollar General Corp. (NYSE:DG) as its second largest holding by market value; we recorded a Board member buying the stock in April. The dollar store’s beta is 0.2, making it even less exposed to the broader economy than large discount retailers such as Target Corporation (NYSE:TGT) and Wal-Mart Stores, Inc. (NYSE:WMT). Dollar General Corp. (NYSE:DG) is valued at a premium to those peers, however, with a trailing P/E of 18, and its recent results have not been particularly strong. Billionaire Stephen Mandel’s Lone Pine Capital owned over 14 million shares according to that fund’s own 13F (check out Mandel’s stock picks).
$30 billion market cap oil and gas equipment and services company National-Oilwell Varco, Inc. (NYSE:NOV) was another common pick between the fund and a company insider. The stock carries trailing and forward earnings multiples of 12 and 11, respectively, with analyst expectations for continued growth resulting in a five-year PEG ratio of 0.9. However, higher costs caused a 17% decline in earnings last quarter compared to the first quarter of 2012. Warren Buffett’s Berkshire Hathaway disclosed ownership of 7.5 million shares of National Oilwell Varco as of the beginning of April (research more stocks Berkshire owns).
In late March, a Board member was buying shares of Yum! Brands, Inc. (NYSE:YUM), and we see from the 13F that Chilton owned about 740,000 shares of the stock. The quick service restaurant experienced a decline in both sales and net income in the first quarter of 2013 versus a year earlier. While some of that may be due to temporary factors relating to food safety in China, the stock does look a bit expensive for our tastes at 19 times forward earnings estimates. At the very least we would avoid Yum until it is on track for high growth in earnings per share.
Rounding out our list of recent insider purchases which were also in Chilton’s portfolio at the end of Q1 is Mosaic Co (NYSE:MOS), a manufacturer of fertilizers. The trailing P/E of 13 is somewhat low in absolute terms but is in line with where fertilizer stocks, and agriculture related companies in general, are trading in the current environment. While earnings were up strongly in Mosaic’s most recent quarter compared to the same period in the previous fiscal year, revenue rose only 2%. Billionaire George Soros was buying the stock between January and March (see more stocks Soros likes).
Disclosure: I own no shares of any stocks mentioned in this article.
