Viking Global, managed by Andreas Halvorsen (also one of its founders), is a long/short global equity fund. During the first quarter of 2013, the fund has made some significant changes to its equity holdings, with the addition of 12 million shares of one major aerospace company as well as an increase of 136% in the fund’s existing stake in a biopharma giant. Retail investors can benefit from tracking hedge fund sentiment, so it’s important to pay attention. Learn the secrets of this strategy here.
The leader of the fund’s top picks has not changed during the first quarter, with Halvorsen increasing its investment in Time Warner Inc (NYSE:TWX) by 14%. The reported value of the 22.3 million shares owned by Viking is $1.28 billion. The stock price of the media giant has climbed 25% so far this year and is currently at approximately $61 per share. For the first quarter of 2013, Time Warner Inc (NYSE:TWX) reported EPS of $0.82, beating the market’s expectations of $0.74 per share with revenues of $6.94 billion.
Price targets for the stock range between $60 and $72, and one underrated strength of Time Warner Inc (NYSE:TWX) is its slate of films set to be released for the remainder of 2013. Man of Steel and Pacific Rim are expected to be $200M-$300M films each, with the former possessing the potential to surpass the $500 million mark.
Aerospace
A new position in the equity holdings of Viking Global is The Boeing Company (NYSE:BA). Halvorsen and his team have bought more than 12 million shares in the aerospace giant, with a reported value of $1.06 billion. The stock’s price has advanced 26% in 2013, with shares currently trading just shy of $97. The Boeing Company (NYSE:BA)’s valuation is about industry average and a yield of 1.9% is solid, but the real strength here has to do with its relationship with the U.S. Department of Defense. The Boeing Company (NYSE:BA) is far less reliant on DoD funds in comparison to peers like General Dynamics Corporation (NYSE:GD) and Raytheon Company (NYSE:RTN), notching less than 40% of its revenues from Uncle Sam.
Da Vinci
The management of Viking has made a significant addition to their stake in Intuitive Surgical, Inc. (NASDAQ:ISRG). The investment was increased by 126% during the first quarter of 2013, with 1.8 million shares now being owned by the fund, with a reported value of $908 million. The medical instruments producer stock has a trailing P/E ratio of 28.50 and a forward P/E of 23.43. For the first quarter of 2013, Intuitive Surgical, Inc. (NASDAQ:ISRG) posted earnings of $4.56 per share and revenues of $611.4 million, beating Wall Street expectations.
Earnings growth of 17-18% a year is expected by the sell-side over the next half-decade, and this forecast relies heavily on Intuitive’s ability to ride out reported instrument issues with its da Vinci system, and it appears that Halvorsen is optimistic.
Soliris
Another big bet for the fund is Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), a pharma manufacturer, with Halvorsen adding 136% to the fund’s position at the end of 2012. Viking now owns 9.5 million shares, valued at $871 million. Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) now trades at a forward P/E ratio of 32.36, and it did beat the Street’s bottom line estimates in its latest earnings report in April, when shares popped by nearly 10%.
Days like these obviously make investors like Viking Global happy, and Soliris is still the only drug in the PNH and aHUS space. A lack of competition is always a good sign, but it’s important to note that Alexion has a quartet of other rare-disease drugs in development, with a hypophosphatasia-focused treatment taking the reins as front-runner to pair with Soliris at the moment.
Ethylene
The final stock in the fund’s top five is LyondellBasell Industries NV (NYSE:LYB), a chemical company. Viking’s management team increased their investment by 74% last quarter, taking the total shares owned to more than 13 million, valued at $830 million. Shares of LyondellBasell Industries NV (NYSE:LYB) are up double-digits year-to-date, and the crux of this stock’s bullish thesis lies in its ability to capitalize on the ethylene boom, which is made from a shale derivative. This analyst seems to think that a MLP spinoff might be in the cards—and should at least be considered—which may be something Halvorsen is watching.
Final thoughts
Halverson has made some important changes to Viking Global’s equity portfolio, with the addition of The Boeing Company (NYSE:BA), and continued support of LyondellBasell, Alexion Pharmaceuticals, Intuitive Surgical and Time Warner Inc (NYSE:TWX). Each of these stocks has its own unique growth driver moving forward, and we’ll be monitoring them closely. Continue preparing for 13F-filing season here.
Disclosure: none
