We have been going through our database of 13F filings for the fourth quarter of 2012. These filings disclose many long equity positions held by a hedge fund or other major investor at the end of a quarter and can be of multiple uses to investors. For one, the most popular small cap stocks among hedge funds have outperformed the S&P 500 by an average of 18 percentage points per year according to our research. Read more about our small cap strategy. It’s also potentially helpful to use 13Fs as an initial source of ideas for further research. Maverick Capital was founded by Lee Ainslie after a short stint at legendary investor Julian Robertson’s Tiger Management. Read on for our quick take on Maverick’s five largest holdings by market value at the end of December according to the 13F or see the full list of Ainslie’s stock picks.
The fund owned 7.5 million shares of Macy’s, Inc. (NYSE:M) at the beginning of 2013. The retailer recently reported decently higher earnings per share for the fiscal quarter ending in January compared to the same period in the previous fiscal year, with results beating analyst expectations. Consensus among the sell-side is that Macy’s is a good value, with the stock trading at 9 times expected earnings for the fiscal year ending in January 2014 and a five-year PEG ratio of 0.8. Cliff Asness’s AQR Capital Management liked Macy’s in the fourth quarter, increasing its stake by 38% (check out more stocks AQR was buying).
Ainslie also liked another tech company:
Another tech pick in Ainslie’s portfolio was Qualcomm, Inc. (NASDAQ:QCOM), with the filing reporting a position of 4.6 million shares. Recent results have been quite good for Qualcomm, though significant earnings growth is already priced in with the stock trading at 17 times trailing earnings. Still, that’s not a particularly high bar and so the communications equipment company may be worth a closer look. Qualcomm joined Apple, Microsoft, and more among hedge funds’ favorite tech stocks (see more tech stocks hedge funds love).
$45 billion market cap pharmacy benefit services company Express Scripts Holding Company (NASDAQ:ESRX) was another of Maverick’s top stock picks, at 5.1 million shares as of the end of December. Billionaire Leon Cooperman’s Omega Advisors was also buying Express Scripts between October and December, and closed 2012 with a total of 2.7 million shares in its portfolio (find Cooperman’s favorite stocks). The company has settled its scrape with Walgreen Company (NYSE:WAG) which had previously been impacting its business; Express Scripts is now valued at 11 times expected earnings for 2014.
The fund disclosed ownership of 1.8 million shares of Ralph Lauren Corp (NYSE:RL) on the 13F, up 30% from three months earlier. The apparel company’s sales were up only slightly last quarter compared to the fourth quarter of 2011, but higher margins caused a high percentage increase in net income. High earnings multiples are common at this time in apparel, and Ralph Lauren is no exception with trailing and forward P/Es of 23 and 19, respectively. Lone Pine Capital, managed by billionaire and fellow Tiger Cub Stephen Mandel, had 3.9 million shares of Ralph Lauren in its own portfolio (check out Mandel’s stock picks).
Disclosure: I own no shares of any stock mentioned in this article.
