Orbis Investment Management has a $10 billion equity fund managed by William Gray, and its overall management structure headquartered in Hamilton, Bermuda. The firm invests in value stock using contrarian ideals mixed with a fundamental analysis of each company, in combination with a top-down stock picking approach. Judging by the largest positions in the fund, we can see favorable economic trends first, company fundamentals second quite clearly. Orbis seems to follow a strategy by narrowing down certain sectors of the economy, such as healthcare and natural resources, and finding the company within those sectors poised to outperform.
It’s always important to track hedge fund sentiment, for its clear market-beating potential; learn more about this strategy. Let’s look at the four biggest multi-quarter positions in this fund’s 13F portfolio, meaning Orbis has held these stocks for more than just one quarter. The hedge fund has held each of these stocks in its portfolio since we began tracking it in the second quarter of last year.
Numero uno
First is NetEase, Inc (NASDAQ:NTES), with over 20 million shares in the Orbis equity portfolio. The China-based Internet technology company has evolved into more of an online gaming operator and the move has paid off very well. Revenues have grown 118% since 2009 and Q4 earnings were up 12% from the same period a year ago. The company’s metrics are also positive with trailing P/E at 12x compared to 27x for the sector. Since the first of the year, the stock has appreciated by 30% and the stock could keep climbing especially after Bank of America Corp (NYSE:BAC) raised its price target for NetEase, Inc (NASDAQ:NTES) from $56.00 to $61.00, largely due to the expectation that revenue from in-house games will increase to 70% from earlier forecasts of 67%.
The best of the rest
At number two is Micron Technology, Inc. (NASDAQ:MU). The manufacturer of memory technologies, including NAND flash and NOR Flash memory, recently entered into a multi-year technology development and IP licensing agreement with Intermolecular. The arrangement will partner Micron’s advanced memory solutions with Intermolecular’s work with R&D efficiency in the semiconductor and clean energy industries. Shares of Intermolecular jumped 13% on the news while Micron Technology, Inc. (NASDAQ:MU) shares rose 4%. The collaboration with Intermolecular followed Micron’s announcement a few weeks earlier that Micron developed a disruptive memory computing solution, which lifted the price of Micron by 3%. The combination of the two helped to offset weak earnings from Micron Technology, Inc. (NASDAQ:MU) in which the company reported negative earnings for all of 2012.
The third largest multi-quarter holding—the fourth largest in Orbis’s overall equity portfolio behind new pick American International Group, Inc. (NYSE:AIG)—is WellPoint, Inc. (NYSE:WLP), with 11.6 million shares. Wellpoint is the second-biggest US health care insurer, providing network-based managed care plans to a variety of markets, including Medicaid and senior markets.
Of course, you can hardly talk about a health-care provider without mentioning the Affordable Care Act. Health care providers will now face increased regulatory scrutiny and price controls, which could hamstring revenue growth. And WellPoint, Inc. (NYSE:WLP) is no stranger to inciting regulatory ire. WellPoint’s recent 10.5% rate hikes in California have been called “excessive” and “unreasonable” by California Insurance Commissioner Dave Jones, and the attempt to raise rates in 2010 by as much as 39% on individuals in California resulted in the resignation of CEO Angela Braly when the company was criticized by the Obama Administration over the size of the rate hike. Fortunately this hasn’t seemed to deter demand for the stock. WellPoint, Inc. (NYSE:WLP) is up 16% for the year.
The hedgie’s fourth largest multi-quarter pick is Weatherford International Ltd (NYSE:WFT). As oil prices slump, so do share prices of oil exploration, drilling and refining companies. Unfortunately, Weatherford provides the equipment and services for all of these. So it comes as little surprise that the company has pulled back from its 2013 high by 10%. With competition from larger companies like Schlumberger Limited. (NYSE:SLB) and Halliburton Company (NYSE:HAL) who are much better positioned for larger projects, Weatherford International Ltd (NYSE:WFT) is unable to capitalize on increased production in offshore oil.
Final thoughts
With large positions in healthcare and oil producers, Orbis obviously faces some challenges this year. This could result in a lackluster performance by the fund especially if stocks like Weatherford International Ltd (NYSE:WFT) and Micron Technology, Inc. (NASDAQ:MU) start to head into negative territory on cheap commodity prices and disappointing earnings, so we’ll be watching the fund’s equity portfolio very closely and you can too.
Disclosure: none
