Sandy Nairn’s Edinburgh Partners revealed their top three picks for the last quarter of 2014 in their latest 13F filing with the U.S. Securities and Exchange Commission. The Scotland-based hedge fund is betting big on its largest positions, which consist of Microsoft Corporation (NASDAQ:MSFT), Tyco International plc (Ireland) Ordinary Share (NYSE:TYC), and Carnival Corporation (NYSE:CCL). The aggregate of these three holdings accounted for almost 45% of the firm’s equity portfolio as of the end of 2014.
Edinburgh Partners was founded in 2003 as an independent investment management firm, focused solely on investment research and portfolio management. The long-only hedge fund managed by Sandy Nairn specializes in global, international, EAFE, European, and emerging market equities, basing its investments on absolute valuation. The firm’s equity portfolio is valued at around $922 million and only counts with companies belonging to the information technology, consumer discretionary, and industrials sector. The company favors a bottom-up, fundamentals driven approach. In addition, it focuses on the future earnings of the equities it invests in, usually taking a five year outlook into account. Thus, Edinburgh Partners seeks to achieve long-term gains, which often leads to lower turnover of portfolios. Furthermore, the hedge fund has more than $13.5 billion in assets.
Microsoft Corporation (NASDAQ:MSFT) was the largest position in Edinburgh Partners’ equity portfolio last quarter, with a total stake of 3.19 million shares. Although the hedge fund reduced its exposure to the company by around 9% during the fourth quarter, Microsoft remains its top pick, the $149.10 million stake accounting for 16% of the fund’s equity portfolio. The technology company made headlines on Wednesday with the presentation of Windows 10, the new operating system that will be available for all platforms later this year. Edinburgh Partners was not the only institutional investor holding this stock, which gained 24.5% in 2014. As we reported a few days ago, Steven Wishnia’s Highland Capital Management LLC also holds this stock as one of its largest positions. Among the hedge funds we track, the largest institutional shareholder betting on Microsoft Corporation (NASDAQ:MSFT,) is Jeffrey Ubben’s ValueAct Capital with 74.2 million shares held as of the end of September.
The second-largest position in Edinburgh Partners’ equity portfolio continues to be Tyco International plc (Ireland) Ordinary Share (NYSE:TYC). Despite a 2% reduction in its stake over the last quarter, the hedge fund continues to hold around 3.07 million shares, valued at $134.01 million. The $17.6 billion market cap company designs, sells, installs, and services security, fire detection, suppression, and life safety products internationally. Tyco International plc (Ireland) Ordinary Share (NYSE:TYC) has been part of Edinburgh Partners’ equity portfolio since the second quarter of 2013, when it disclosed a new position of 5.2 million shares. Since then, the hedge fund has been gradually reducing its exposure to the company, while the stock gained around 22%.
Edinburgh Partners large stake in Tyco International plc (Ireland) Ordinary Share (NYSE:TYC) could deliver some solid returns in 2015, as several analysts have indicated the stock is well positioned to perform well. Shareholders are already optimistic, following the company’s announcement of its acquisition of Industrial Safety Technologies, a gas and flame detection gear manufacturer. This latest purchase is expected to add around $140 million to the firm’s annual revenue. In addition to Edinburgh Partners, Doug Silverman and Alexander Klabin’s Senator Investment Group is also bullish regarding the Ireland-based company, holding a position of 5.3 million shares.
Whereas Microsoft and Tyco International were already amongst Edinburgh Partners’ top three picks by the end of the third quarter, Carnival Corporation (NYSE:CCL) went to the top during the fourth quarter. The hedge fund currently holds 2.88 million shares of the company, down from 2.96 million in the previous quarter. At the end of December, the stake was worth $131.25 million and represented around 14% of its equity portfolio. Since the fund added Carnival to its equity portfolio in the fourth quarter of 2012, the stock has gained around 20%. Furthermore, the company boasts solid future growth prospects, due to its leading position in the underpenetrated cruise industry. Considering its great performance during 2014 and the expected increase in the size of the cruise operators’ fleet in 2015, Edinburgh Partners’ bullish stance is more than justified. In addition to the Scotland-based hedge fund, Carnival Corporation (NYSE:CCL) is backed by Keer Neilson’s Platinum Asset Management, which holds a stake of 7.1 million shares in the company.
Disclosure: Pablo Erbar holds no position in any stocks or funds mentioned.
