Which Oil And Insurance Giants Is Russel Hawkins Betting Heavily On?

Heading into Q4, Russell Hawkins is betting big on financial and tech sectors, but has also made a notable play for an oil giant. In the latest round of 13F filing, his fund Hawkins Capital has revealed that 30% of its funds are invested in financial stocks, while 24% were pledged to technology stocks. The fund’s equity portfolio was valued at $213 million, with Hawkins having sold out of 3 stocks and initiated 2 new positions, one of which made it into the top 5 holdings and will be analyzed in this article. Based in Houston, Texas, Hawkins Capital is a long/short hedge fund that invests mainly in publicly traded companies. Before starting his own fund, Russell Hawkins managed as much as $8 billion for Dreyfus’ mutual funds. Let’s have a look at his top bets for the fourth quarter and how other hedge fund managers feel about these stocks.

But why do we track hedge fund activity? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect their activity. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period hedge funds’ top small-cap stocks edged the S&P 500 index by double digits annually. The 15 most popular small-cap stock picks among hedge funds also bested passive index funds by around 53 percentage points over the 38 month period beginning from September 2012 (read the details here).

We’ll start off with No. 5 – General Electric Company (NYSE:GE). Hawkins Capital reported a 2% increase in its holding to 587,205 shares valued at $14.8 million. The stock has been a solid performer so far this year, having appreciated by roughly 20% to date. It wasn’t a steady increase, though, as the stock wobbled around without a clear sense of direction most of the year. Having survived the August slump, GE geared up for a rally at the beginning of September and has been unstoppable since then. Hawkins is not the only fund manager betting big on this stock, with Nelson Peltz having initiated a new position in GE and having bought the stock aggressively throughout the third quarter. His fund, Trian Partners reported ownership of 90.5 million shares valued at $2.28 billion, the largest position among the funds we follow.

One of the recent additions to Hawkins Capital’s portfolio, American International Group Inc (NYSE:AIG) is sitting pretty on the fourth place. According to its latest 13F filing, the fund holds exactly 300,000 shares of the insurance giant, worth in excess of $17 million. AIG shareholder’s nerves were seriously tested during the August sell-off, with the stock falling from a high of $65 per share to a low of $55 per share, testing the level again in early September before setting course for North. It was probably at this time that Hawkins felt comfortable buying the stock on the dip. Since then AIG has surged by as much as 16% and is currently up by 12% for the year. In general, hedge funds have been shying away from American International Group Inc (NYSE:AIG), as the number of managers holding a long position declined to 94 from 99 at the end of June. John Paulson, who holds the largest stake in AIG among the managers we follow, was among those who kept their faith and left his position intact. His fund, Paulson & Co, reportedly holds 14.6 million shares valued at $829 million.

Head to the next page to find out what stocks have made it to the top 3.

Intel Corporation (NASDAQ:INTC) has lost some of its appeal among elite funds during the third quarter, as the number of long positions decreased to 45 from 48 a quarter earlier. Russell Hawkins was selling Intel shares as well, having dumped a third of his holding by the end of the quarter. Hawkins Capital reported ownership of 722,488 shares worth $21.7 million. The stock spent most of the year going downhill, dropping by as much as 32% by the end of August before staging a remarkable comeback, currently only 5% down for the year. Perhaps dumping the stock at the point in time was not the most inspired decision. Top holders of Intel Corporation (NASDAQ:INTC) stock were unfazed by the temporary slump and have used the opportunity to buy on a low.

Hedge funds may not particularly like Royal Dutch Shell plc (ADR) (NYSE:RDS.B), but there are a few who see some great upside potential in this stock and Russell Hawkins is one of them. He boosted his stake by a whooping 309% during the quarter, making this his second biggest equity position. His fund reportedly holds 612,029 Class B shares of Royal Dutch Shell, which carried a value of $29 million at the end of the quarter. Jim Simons’ Renaissance Technologies reported a new position in Royal Dutch Shell plc (ADR) (NYSE:RDS.B) at the end of the quarter, having acquired some 261,327 Class B shares, while Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital reported a massive boost to its holding of Class B stock, which stood at 488,100 shares at the end of September.

Finally, we come to Hawkins’ top dog – Oaktree Capital Group LLC (NYSE:OAK), a global investment manager. Don’t be fooled by the appearances, though; Hawkins has been dumping the stock since the beginning of the year. Whereas at the end of 2014 the fund held 2.33 million shares of Oaktree Capital Group, at the end of September the position amounted to just 666,039 shares valued at $32.9 million. The stock has been a lousy performer so far this year, drifting aimlessly most of the time before plunging into red at the end of August. Shares are currently trading at $49 apiece, having lost roughly 5% of their value since the beginning of 2015. Hedge fund sentiment was unchanged during the third quarter, with 13 fund reporting long positions in this stock. As Oaktree Capital Group LLC (NYSE:OAK) shares were changing hands, Tom Gayner was among those buying, with his fund, Markel Gayner Asset Management, reporting a 41% increase in its holding at the end of the third quarter to 454,500 shares.

Disclosure: none.