Steven Check, the founder and Chief Investment Office (CIO) of Check Capital Management Inc. relies on financial stocks, with the fund heavily invested in Wells Fargo & Co (NYSE:WFC) and Berkshire Hathaway Inc. (NYSE:BRK.B). Management has made additions to their holdings in Wells Fargo and Wal-Mart Stores, Inc. (NYSE:WMT). Let us take a look at how the 5 biggest positions in Check Capital Management’s equity portfolio have done in 2013, and where they stand now.
Why pay attention?
It’s important to track hedge fund sentiment, because on the whole, their best picks have been shown to outperform the market by 18 percentage points a year. Best of all, retail investors can capitalize on this phenomenon, but they have to know where to look first. Learn the secrets of this strategy here.
Numero uno
Check Capital Management has made a big addition to their stake in Wells Fargo & Co (NYSE:WFC), the San Francisco, CA based bank. Steven Check has increased their position by 24% and has taken the fund’s holding of Wells Fargo & Co (NYSE:WFC) shares to a tally in excess of 1.8 million shares. Since the start of the year, the bank’s stock has been in an uptrend, advancing 8% and is currently trading just under the $38 mark.
Shares are traded at a trailing Price to Earnings (P/E) ratio of 10.74, well below the industry average of 21.8, according to Yahoo! Finance. The company has a beta of 1.18 and pays a dividend of $0.69. This week, Reuters announced that the New York Attorney General intends to sue Wells Fargo & Co (NYSE:WFC) for violating the terms of mortgage settlements.
The best of the rest
Check’s second biggest position is Berkshire Hathaway Inc. (NYSE:BRK-B). The fund’s management has made a small reduction in the size of their Berkshire Hathaway Inc. (NYSE:BRK.B) stake, but that has not affected the stock’s position among the top picks of Check Capital Management. Warren Buffett’s investment company has a beta of 0.29, providing shareholders with a safe investment, and a Levered Free Cash Flow of a whopping $15.99 billion. The stock has been in an uptrend since 2009; so far in 2013, the price of Berkshire Hathaway’s B shares has advanced 20.6%.
Check bets on AFLAC Incorporated (NYSE:AFL) as well. The fund has added more than 35,000 shares to their stake in the accident and health insurance company. AFLAC Incorporated (NYSE:AFL) is currently trading at a trailing P/E ratio of 8.81, below, but close to the industry average of 9.5. The company pays a dividend of $1.36, while the stock has a beta of 1.66. It is expected to at least perform along side the market, with 12 analysts seeing the stock as a Hold, while 10 analysts recommend it as a Buy or Strong Buy. The price range of the stock is between $53-$68. Considering the current price near $55.75, one can reasonably expect shares to further appreciate in the coming months. Wall Street expects the company’s revenues and earnings to fall this year, but to rise again in 2014.
The final two
Among the top holdings of Check Capital Management we also find Wal-Mart Stores, Inc. (NYSE:WMT). The fund has added 14% to their stake in the retail stores chain, taking it to more than 400,000 shares. The stock has a beta of 0.42 and pays a dividend of $1.66. Wal-Mart shares are trading at a trailing P/E ratio of 15.75 and a forward P/E of 13.45. Analysts who have initiated coverage expect the stock to at least perform. Fifteen analysts recommend the stock as a Hold, while 12 tag it as a Buy or Strong Buy. On the whole, they expect earnings to rise and predict EPS of $5.35 a share in 2013 and $5.88 in 2014. Wal-Mart’s revenues are expected to rise as well, by 5.10%, and analysts see an upside of $90 on its stock price.
Microsoft Corporation (NASDAQ:MSFT) is a very popular stock these days, making the top five of Check Capital Management as well. Although fund management has reduced their position by 63,176 shares, Check still owns approximately 400,000 shares of the tech giant. Windows 8 did not have the success Microsoft Corporation (NASDAQ:MSFT) hoped for, but it still has generated solid profits for Bill Gates’ company. Microsoft has increased their efforts to promote their mobile Operating System – Windows Phone – used by Nokia Corporation (ADR) (NYSE:NOK) in their smartphones. Microsoft’s stock price has advanced 24% in 2013 thus far.
Final remarks
Steven Check has built a balanced equity portfolio for Check Capital Management, which has constantly performing stocks among its biggest holdings. The fund is also trying to create an edge by investing in riskier companies that he considers to have good prospects. Compare this equity portfolio with those of other hedge funds, and also check out our market-beating strategy for more information. We reveal the details of this strategy in our premium section, and you can also download the free edition of our newsletter here.
Disclosure: none
