Bacon has been dubbed a macro-themed investor, and one that chooses to take a long-term approach by, proverbially speaking, seeing the forest through the trees. In looking over Bacon’s most recent 13F filing – which certain investors are required to file with the SEC quarterly to reveal what public equities they own – we identified five long term bullish bets that Bacon is making.
Assured Guaranty Ltd. (NYSE:AGO) is the first pick that stood out to us. Assured was an over 40% increase in shares for Bacon during 3Q. The financial company is a provider of credit protection products and appears to be one of the cheapest players in the industry. Trading at a mere 0.5x book, Assured is well below other peers Allied World Assurance (1.2x) and ProAssurance (1.3x). Given Assured provides guarantees for various financial products, we see Bacon’s investment as a bet on a strengthening economy and financial system. We see the financial company as a good value trade with a 2.6% dividend yield, above its other peers, and its expected five-year annual EPS growth of 12% is solid.
Bacon increased his Melco Crown Entertainment Ltd. (NASDAQ:MPEL) stake by 193% over the third quarter. At 20x earnings, Melco is on the high end of the industry, but its outsized growth prospects warrant a premium P/E multiple. The growth prospects of Melco are well above any of its gaming peers; Melco expects to grow five-year EPS over 35% annually, compared to Penn National (7%) and International Game Technology (12%). We see Melco as quite the growth at a reasonable price opportunity with only a 0.6 PEG ratio. These gaming companies have been pressured due to a slowing global economy, but China-based casino locations have held up better than others and should continue to do so.
Nexen Inc. (NYSE:NXY) was a new position for Moore Global of over 1.2 million shares. Nexen is a global oil and gas energy company with assets in the Americas, the U.K. and Africa. At 34x earnings, Nexen trades well above its peers, which we see as an acquisition premium. Nexen is up over 50% year to date on CNOOC’s buyout offer.
We believe that Bacon is likely looking to capitalize on the spread between the stock’s trading value and buyout offer, and although Bacon does like to take a macro-themed approach, he is not opposed to making money, which may well be his mindset here. Even so, we believe that Bacon is a long-term believer of the energy market, particularly oil. Other notable oil plays in Bacon’s 3Q portfolio were Marathon Oil and Oasis Petroleum, while Nexen is also a top bet by billionaire James Dinan and York Capital (check out their newest stock picks).
News Corp (NASDAQ:NWSA) was another new position for Moore that was over 1 millions shares. News Corp trades near the very top of the media industry at 23x earnings, but its 12x forward P/E gives investors reason to take notice. Given the media company’s solid growth prospects, its PEG comes in below 1.0. The macro theme for News Corp is that this media company has “rolled with” the progressive shift from print advertising to digital. This, in part, will be a key interim driver of News Corp’s expansion. As advertising dollars shift spectra, much speculation surrounds the fact that News Corp could unlock value for shareholders if its TV segment were split from current operations. News Corp is one of the top 10 services stocks loved by hedge funds (check out our entire epic Top 10 here).
Dollar General Corp. (NYSE:DG) saw Moore boost its 2Q shares by more than 150% in 3Q. Dollar General is also the number one retail stock loved by hedge funds. Dollar General expects to grow revenues by 9% in 2012 as it expands its product mix to consumables. The move to new products will help Dollar General expands its customer base and also dig deeper into current customers’ wallets. We see one of the beauties of Dollar General is its ability to excel regardless of the economic backdrop, given its discount and consumer staple products. We believe that Bacon sees a rebounding economy as beneficial to Dollar General, more than its other discount-retailing peers. Dollar General has expanded nicely over the last twelve months and still has room to grow, with plans to enter California and the Northeastern U.S. in 2013.
On the whole, Bacon is betting on an overall rebound in the global economy. Investments in the financial protection company should bode well in a bullish situation as default rates subside. Meanwhile, the gaming and casino stocks will benefit from higher employment and more consumer discretionary spending. Bacon’s various bets on the energy markets will prove beneficial as the global economy starts back up, while Dollar General will continue to capture market share as a leading supplier of consumer staples. The one fundamental change, regardless of economic performance, will be the continued shift in the media industry in which News Corp appears to be an industry leader.
