Michael Lowenstein‘s Kensico Capital is known for its diversified investments, which are primarily in equities. However, back in 2006, the fund made a detour and invested in credit default swaps, profiting enormously from the effort. The firm was co-founded in January 2000 by Michael Lowenstein and Thomas Coleman and has grown over the years to sport $8.82 billion in assets under management. Kensico Capital’s 13F filing with the U.S. Securities and Exchange Commission for the period of March 31, 2015, indicated that the fund had $5.06 billion in public equity portfolio value. In as much as the company had a diversified portfolio, technology came out on top of the other sectors. In this article we will focus on the fund’s top technology picks for the period, which are SanDisk Corporation (NASDAQ:SNDK), Microsoft Corporation (NASDAQ:MSFT), and eBay Inc (NASDAQ:EBAY).
Rob Hyrons / Shutterstock.com
Let’s first take a step back and analyze how tracking hedge funds can help an everyday investor. Through our research we discovered that a portfolio of the 15 most popular small-cap picks of hedge funds beat the S&P 500 Total Return Index by nearly a percentage point per month on average between 1999 and 2012. On the other hand the most popular large-cap picks of hedge funds underperformed the same index by seven basis points per month during the same period. This is likely a surprise to many investors, who think of small-caps as risky, unpredictable stocks and put more faith (and money) in large-cap stocks. In forward tests since August 2012 these top small-cap stocks beat the market by an impressive 83 percentage points, returning over 142% (read the details here). Follow the smart money into only their best investment ideas all while avoiding their high fees.
Follow Michael Bernard Lowenstein's Kensico Capital
First, let’s consider SanDisk Corporation (NASDAQ:SNDK), in which Kensico Capital held 6.27 million shares with a market value of $399.13 million at the end of the first quarter. SanDisk is a flash memory designer and manufacturer, ranking at number three globally in that market Just recently, the company reestablished itself within the flash memory segment by introducing its breakthrough flash drive 3.0, which delivers the world’s smallest 128GB storage. The company also introduced a 250GB flash storage. These two entries are likely to boost its market share and earnings. SanDisk Corporation (NASDAQ:SNDK) is keen on strengthening its enterprise solutions and 3D segments. The company has every reason to up its game, especially now that the execution of its partnership with its biggest customer, Apple Inc. (NASDAQ:AAPL), is facing challenges. It’s these challenges that saw the company perform dismally during the first quarter of 2015, making it the worst performer on the S&P 500. The stock posted $0.50 in earnings per share, which came in 15.25% light of analysts’ expectations. At the end of the first quarter of 2015, a total of 40 hedge funds out of the more than 700 that we monitor had stakes in the stock, with their holdings amounting to $1.35 billion. Those figures were a steep drop from the 58 funds that held $2.76 billion of the company’s stock three months prior. Among the hedge funds still hanging on were David Cohen and Harold Levy’s Iridian Asset Management and Jean-Marie Eveillard’s First Eagle Investment Management.
Kensico Capital also has a position in Microsoft Corporation (NASDAQ:MSFT), which is one of the more popular stocks among the funds we track. At the end of the first quarter, the fund held a total of 7.36 million shares of the company with a market value of $299.22 million, having upped its stake from the previous 6.31 million shares it held at the end of the prior quarter. Microsoft is focused on boosting its market share in spite of the stiff competition in the sector. During E3 2015, the company announced a strategic move to expand its gaming market and to hedge off competition from bitter gaming rival Sony Corp (ADR) (NYSE:SNE). The Redmond, Washington-based company said it is introducing backwards compatible Xbox Ones to enable gamers to play Xbox 360 games in the new consoles. Sony on the other hand has phased backwards compatibility out of its own consoles. Microsoft Corporation (NASDAQ:MSFT) also recently effected a top management shake-up to realign its operations for better performance. Other activities towards the same objective included the formation of a Windows and Devices Group, which combines the Operating Systems Group and Microsoft Devices Group to form a more robust front to handle matters of Operating Systems and devices. During the last quarter, the company surprised analysts by posting earnings per share of $0.61 against a consensus estimate of $0.51. During the respective quarter last year, the company had $0.68 in earnings per share. The company recently announced a quarterly dividend of $0.31 per share, a yield of 2.66%. At the end of March, a total of 110 hedge funds had stakes in the stock, with an aggregate value of $16.13 billion. A few of these funds were Jeffrey Ubben‘s ValueAct Capital, First Eagle Investment Management, and Boykin Curry’s Eagle Capital Management.
Kensico Capital was also among the investors that held stakes in eBay Inc (NASDAQ:EBAY) as of March 31. Kensico Capital held 2.19 million shares of the e-commerce company and owner of online payment system Paypal, with the shares having a market value of $126.39 million. That marked a significant leap over the 1.22 million shares of the stock it held at the end of the previous quarter. While billionaire George Soros also boosted his stake by more than 200% and hedge fund sentiment was slightly positive during the quarter, analysts seem to be wary about eBay’s growth prospects following its PayPal spinoff. In 2014, the Paypal segment contributed up to 44% of eBay’s revenue and is credited with making it possible for the San Jose, California-based e-commerce giant to surprise analysts in both revenue and profit in its latest quarterly results. eBay Inc (NASDAQ:EBAY) posted earnings per share of $0.67 on revenue of $4.45 billion, while analysts expected $0.58 in earnings per share and revenue of $4.42 billion. The company’s return on investment of 15.32% is one factor that makes it attractive, as that doubles the industry average. The company does have potential after the spin-off and the proposed sale of its enterprise unit, which is expected to bring in between $1-1.5 billion however. That amount can be a source of cash for a number of corporate activities to enhance the stock’s performance. At the end of the first quarter, 90 funds out of the 730 actively reporting funds that we track had stakes in the stock, holding a total of $11.86 billion in aggregate. A few of these institutional holders were billionaire Carl Icahn‘s Icahn Capital LP, billionaire Barry Rosenstein’s JANA Partners, and William B. Gray’s Orbis Investment Management.
Disclosure: None
