Eric Mindich is one investor who is not shy about taking initiatives and who has impressed the investment community from a very early age. At just 27, he became the youngest partner ever at Goldman Sachs. We decided to take a look at his latest initiatives as far as new additions to his fund, Eton Park Capital‘s equity portfolio are concerned. During the first quarter Eton Park initiated stakes in Zimmer Holdings, Inc. (NYSE:ZMH), Motorola Solutions Inc (NYSE:MSI), Polaris Industries Inc. (NYSE:PII), and Microsoft Corporation (NASDAQ:MSFT) among other companies, and we’ll look at these four positions in this article.
We follow hedge funds like Eton Park Capital because our research has shown that their stock picks historically managed to generate alpha even though the filings are up to 45 days delayed. We used a 60-day delay in our back tests to be on the safe side and our research showed that the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. After adjusting for risk, our calculations revealed that these stocks’ monthly alpha was 80 basis points. We have also been sharing and tracking the performance of these stocks since the end of August 2012, during which time they have returned 144%, outperforming the S&P 500 ETF by nearly 85 percentage points (see more details here).
After an illustrious career at Goldman Sachs spanning 15 years, Mindich launched Eton Park in 2004. By the end of last year, the multi-strategy hedge fund’s annualized returns stood at 10%. Currently, Eton Park has about $15 billion in assets under management along with a public equity portfolio of about $3.46 billion. Mindich’s latest global and macroeconomic bets, which included positions in the German stock exchange and shorting the Euro against the U.S Dollar have paid off well for the fund.
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Coming back to Eton’s newly initiated stakes, Zimmer Holdings, Inc. (NYSE:ZMH) occupies the top spot, with the investor’s new position of 1.59 million shares being valued at $187.26 million. The holding represented about 5.41% of the fund’s portfolio value. The $19.48 billion healthcare company’s stock is up slightly, by 1.19% over the past year despite a 2.3% dip in its first quarter revenues to $1.13 billion on a year-over-year basis and a corresponding 20.9% dip in EPS to $1.02. In order to expand its musculoskeletal portfolio, Zimmer Holdings, Inc. (NYSE:ZMH) chose to acquire Biomet for $13 billion. The deal has been cleared by the European Commission and the Japan Fair Trade Commission, with the company now divesting some of its businesses to get the final clearance from the U.S. Federal Trade Commission. The expected completion date is July 23. After Eton Park, Samuel Isaly‘s Orbimed Advisors is the next largest stockholder of Zimmer Holdings, Inc. (NYSE:ZMH), owning 1.23 million shares valued at $144.32 million as of March 31.
Mindich initiated a position in Motorola Solutions Inc (NYSE:MSI) of 1.51 million shares valued at $100.70 million. The technology company’s stock has slid by some 11% so far this year as compared to the communication equipment industry’s gains of 1.38% during the same period. The price-to-sales ratio of Motorola Solutions Inc (NYSE:MSI), which stands at 2.12 is also higher than the industry’s average of 1.87. Jeffrey Ubben‘s ValueAct Capital is the largest stockholder of Motorola Solutions Inc (NYSE:MSI) among the funds we track, owning 17.59 million shares valued at $1.17 billion.
Next on our list is Polaris Industries Inc. (NYSE:PII), in which Mindich initiated a position of 540,900 shares valued at $76.32 million. Despite the fact that the company beat both the top and bottom line estimates in its first quarter financial results, Polaris Industries Inc. (NYSE:PII)’s stock is down by 4.15% so far this year. However, its performance for the past year amounts to a 12.44% appreciation. Another prominent stockholder of the company is Ken Heebner’s Capital Growth Management.
Finally Eton Park acquired some 1.68 million shares of Microsoft Corporation (NASDAQ:MSFT) valued at $68.48 million. The last time Microsoft was found in the fund’s portfolio was in 2006, but the latest winds of change which are blowing in the tech giant’s favor have led to its re-emergence in Eton’s portfolio. According to Mala Gaonkar, who is a co-portfolio manager at Lone Pine Capital, Microsoft Corporation (NASDAQ:MSFT) has recently made much needed changes in its research and development teams and has also cut its operating costs by optimizing spending. She pitched the company as her investment idea at the annual Sohn Investment Conference in early May. Stephen Mandel‘s Lone Pine Capital significantly increased its stake in Microsoft Corporation (NASDAQ:MSFT) to 14.49 million shares valued at $588.93 million during the first quarter.
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