Levin Capital Made A Big Investment In These Stocks In Q2

Levin Capital is a hedge fund that was founded in 200 and is managed by John A. Levin, a former manager of Levin Management and President of BKF Capital Group. The fund focuses mainly on large-cap stocks and uses a bottom-up strategy in establishing the value of its target stocks. Levin Capital has released its 13F for the June 30 reporting period, with the filing indicating that it has a public equity portfolio valued at $6.76 billion, up slightly from $6.68 billion at the end of the first quarter. The hedge fund boasts a diversified portfolio, having interests in healthcare, information technology, industrials, and finance, among other sectors. In this article, we focus on Discover Financial Services (NYSE:DFS), Corning Incorporated (NYSE:GLW), and McDonald’s Corporation (NYSE:MCD), which emerged as some of the fund’s biggest investments in the second quarter.

But before we dive deep into each of these three stocks, let’s first have a look at why Insider Monkey tracks hedge fund activity. We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular stock picks in real time since the end of August 2012. These stocks have returned 123% since then and outperformed the S&P 500 Index by around 65 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.

Let’s first look at Discover Financial Services (NYSE:DFS), which featured among Levin Capital’s top bullish plays during the second quarter of 2015. At the end of the quarter, the fund held a total of 2.83 million shares of the stock, with the holding having a value of $163.01 million, that after raising its position in the stock by 115%. The company was recently caught in a tussle with the Consumer Financial Protection Bureau after the body ordered it to pay $18.5 million relating to illegal practices touching on the collection and repayment of student loans. At the end of the second quarter of 2015, Winton Capital, managed by David Harding, held a total of 1.65 million shares of Discover Financial Services (NYSE:DFS) valued at $95.31 million, having bought 136,959 shares of the company during the second quarter. Matthew Tewksbury’s Stevens Capital Management was also long in the stock at the end of the quarter, holding 301,181 shares valued at $17.35 million after it sold 158,556 shares in the quarter.

At the end of the second quarter, Levin Capital’s position in Corning Incorporated (NYSE:GLW) consisted of 8.20 million shares valued at $161.86 million, after the fund raised its stake in the stock by a whopping 4,267% during the quarter. The stock now represents 2.39% of its 13F portfolio, up from a mere 0.06% going into the second quarter. Year-to-date, the stock’s performance has been wanting, having lost 21.76% and being down by 14.53% over the past three months. The company recently announced that its high-precision opto-mechanical assembly is being used by NASA in its imaging system in NASA’s New Horizons mission. The Corning, New York-based manufacturer of glass and ceramics declared a quarterly dividend of $0.12 per share, payable on September 30, to shareholders of record as of August 31, 2015, representing an annualized dividend yield of 2.52%. At the end of the second quarter, Pzena Investment Management, led by Richard S. Pzena, held a total of 7.68 million shares of Discover Financial Services (NYSE:DFS) with a market value of $151.59 million after cutting its stake by 41,465 shares. Winton Capital Management was also long in this stock at the end of the second quarter. It had a position of 5.05 million shares valued at $99.60 million after significantly raising its stake in the stock, by 1.13 million shares.

Another stock that featured among Levin Capital’s bullish bets in the second quarter was McDonald’s Corporation (NYSE:MCD). The fund bought 713,096 shares of the stock during the second quarter to raise its position to 1.66 million shares valued at $157.41 million as of June 30. For the first time in 24 years, the world’s largest food chain will be shrinking in the U.S., its home turf. The firm, which faces sales and branding problems, will be closing down 184 locations and opening only 125 new ones this year. Since 2011, the shares of McDonald’s have been largely flat, while the S&P500 has jumped by well over 60% during the same span. This year, McDonald’s Corporation (NYSE:MCD) is already down by 21.76%. At the end of the second quarter of 2015, First Eagle Investment Management, led by Jean-Marie Eveillard, was long in the stock, owning 5.89 million shares valued at $559.86 million. Marathon Asset Management, managed by Bruce J. Richards and Louis Hanover, held 1.10 million shares of the stock with a market value of $104.86 million, having sold 255,420 shares during the quarter.

Disclosure: None