The $6 billion Carlson Capital, a Dallas-based hedge fund that focuses its strategies on philosophy, people and process, is a stark contrast to other funds, many of which have formulated complex algorithms to perform detailed quantitative analyses. As more and more non-Wall Streeters establish their own funds, many have begun to embrace manager Clint Carlson’s approach, and according to his most recent 13F filing with the SEC, Carlson added several new companies to his already diversified equity portfolio in preparation for 2013.
Let’s take a closer look at the top five moves he was making to determine where retail investors should focus their efforts. It’s always important to watch hedge fund sentiment, as it has been quite the market-beating strategy for market participants like you and me. Learn more here.
Carlson picked up nearly 2 million shares of Kraft Foods Group Inc (NASDAQ:KRFT) last quarter for a total value of $89,845,000. Kraft Foods Group Inc (NASDAQ:KRFT) reported a drop in revenue for the fourth quarter from $18.6 billion to $18.3 billion, which ultimately caused the percentage of sales devoted to costs to increase to 85% from 68% the prior quarter. Despite a decline in earnings, the stock continues to appreciate. After splitting off its snack division last year, analysts now predict that Kraft Foods Group Inc (NASDAQ:KRFT) is better able to streamline the production of its domestic grocery division—its bread and butter, so to speak. Now, the stock could face some profit taking pressure at $52.50, but even at this share price, it’s still priced at only 4 times book versus a sector average that’s 20% higher.
Number two of new positions for Carlson Capital is Goldcorp Inc. (NYSE:GG). The stock has fallen in tandem with the price of gold and because of the intrinsic relationship between gold-related equities and gold prices, as one goes, so goes the other. Carlson was obviously betting on another test of $1,800 resistance in gold, but when the metal turned south on profit taking, it took Goldcorp Inc. (NYSE:GG). along in sympathy. Although Goldcorp Inc. (NYSE:GG). trades at 10 times trailing earnings versus a sector average of 20.0x, the company saw net income decline by $200 million and earnings decline to $1.95 from $2.18 in its latest financials.
This was a result of the increase in the amount of sales devoted to the cost of goods sold. The weakness in Edison’s stock price is blamed on the drop in power prices, which ultimately resulted in the bankruptcy filing of Edison Mission. Like Goldcorp Inc. (NYSE:GG), the success of Edison relies on the price of energy. As one goes, so goes the other, but it’s easy to see Carlson’s motivations here.
At number four is Regions Financial Corporation (NYSE: RF). Regions has recently shed its brokerage and investment banking divisions to focus its resources solely on banking. This seems to be the ticket, as Regions is trading less than 1 times its book value, and it also enjoyed a 29% increase in fourth quarter revenue. Carlson Capital owns 9.4 million shares of Regions Financial, and has to be pleased with the way the stock has been trading over the past six months. Since hitting a low of $6.25 during the fourth quarter of 2012, the stock last traded near the $8.20 mark.
Finally there is Huntington Bancshares Incorporated (NASDAQ:HBAN), which continues to feel the pain from its 2007 acquisition of Sky Financial Group. Huntington attempted to mitigate these losses by writing off a significant amount of bad loans, and recent earnings reports suggest that Huntington may be through the worst of it. For the fourth quarter, revenues are up to $2.7 billion compared to $2.4 billion one quarter earlier. This, at least partially, has helped to improve the bank’s bottom line to $641 million from $542 million. Compared to Wells Fargo & Co (NYSE:WFC), Huntington trades at very similar multiples, but does enjoy a much better debt-to-equity ratio. Carlson might consider Huntington a slightly better value at 10 times earnings, as Wells Fargo is trading near a P/E of 11.0x.
From what we can tell by Carlson Capital’s recent purchases, its “trend of focus” appears to be placing a higher preference on value over other philosophies, and the fund also appears to favor banking and energy stocks, both of which are expected to grow in tandem with an improving global economy. Insider Monkey will continue to follow the developments in Carlson Capital, and you can too by bookmarking here.
Disclosure: none
