Several weeks after the end of each quarter, hedge funds and other major investors are required to file 13Fs with the SEC. We use this information for a number of purposes, including research on investing strategies (we have found, for example, that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year). While we don’t recommend blindly following hedge fund activity, we think that these filings can be useful as a source of initial ideas in a number of areas, including dividend stocks, which investors can then research further. Read on for our quick take on five stocks which billionaire Kerr Neilson’s Platinum Management owned at the end of December which currently pay dividend yields of at least 3% going by current prices and dividend policy (or see the full list of stocks Platinum reported owning).
One of the fund’s top picks was Microsoft Corporation (NASDAQ:MSFT), with the filing disclosing ownership of over 13 million shares of the company. Microsoft pays a dividend yield of 3.2%, though in value terms we’re a bit wary of the company: the forward P/E is low, at 9, but that figure likely includes a temporary boost to earnings from the release of Windows and Office. In addition, the PC industry appears to be in an even sharper decline than expected potentially weakening demand for Microsoft’s products. The stock was one of the most popular technology stocks among hedge funds in the fourth quarter (here are more tech stocks hedge funds loved).
Another large tech company paying a moderately high dividend yield (3.3% in this case) and near the top of Platinum’s portfolio was Cisco Systems, Inc. (NASDAQ:CSCO). Cisco trades at 12 times trading earnings, placing the stock at value levels and meaning that very little growth is required to make it undervalued. In its most recent quarter revenue increased 5% compared to the same period in the previous fiscal year, with earnings growth at least temporarily being much higher. Billionaire Ken Fisher’s Fisher Asset Management cut its stake in Cisco during Q4 but still owned over 33 million shares (find Fisher’s favorite stocks).
Neilson and his team increased their stake in Johnson & Johnson (NYSE:JNJ) by 54% to a total of 2.8 million shares. The dividend yield here is 3%, and the personal products company also boasts some credibility as a defensive stock with a beta of 0.5 and a market capitalization of over $200 billion, showing that it is fairly well insulated from market conditions. The valuation may be a bit high at a trailing earnings multiple of 21, however. Johnson & Johnson was one of Prem Watsa’s largest holdings at the end of 2012; “the Warren Buffett of Canada” had 5.9 million shares in his portfolio (check out Watsa’s stock picks).
Platinum reported a position of 2.9 million shares in Barrick Gold Corporation (USA) (NYSE:ABX), a $25 billion market cap gold miner. The stock is down 42% in the last year, even though Wall Street analysts are relatively optimistic for the next couple years and their forecasts for this year and 2014 imply some respectable earnings multiples. Barrick also pays a dividend yield of 3% as the company has continued paying a 20 cent per share quarterly dividend as the price has dropped. Billionaire Jeffrey Vinik, who owns a number of gold and natural resources stocks, was another major shareholder according to his 13F (research more stocks Vinik likes).
Disclosure: I own no shares of any stocks mentioned in this article.
