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Blue Ridge Capital’s Portfolio Review - Lowest P/E Stocks

December 20, 2013 | About:
Sally Jones

Sally Jones

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John Griffin once gave investors the sage advice to build the ark on their sunny days. A legendary value-oriented investor, John Griffin is the president of Blue Ridge Capital, an investment partnership that he founded in 1996. Griffin is also the founder and trustee of Blue Ridge Foundation New York. Prior to founding Blue Ridge Capital, Guru Griffin was president of Tiger Management, and a protégé of Tiger Management’s Julian Robertson. Early on, Griffin was a financial analyst for Morgan Stanley Merchant Banking Group. An active philanthropist, John Griffin also serves on the boards of iMentor (founding chair), Robin Hood Foundation and Robertson Foundation, and is a past board member of the Michael J. Fox Foundation, among others.

Blue Ridge Capital uses a long-short portfolio strategy, but generally runs net long. Longs may decline but they will bounce back based on the inherent strength of the businesses; shorts balance the portfolio because they can zero out in a poor market. In other words, the firm targets absolute returns by investing in companies that dominate their industries and short-selling the ones with fundamental problems. The firm employs fundamental analysis to make its investments, looking for companies that have competitive advantages.

Blue Ridge uses a checklist methodology to vet both long and short investments. Focused on company performance versus an industry sector, Blue Ridge factors in the power of stakeholders, barriers to market entry, ingredients of success, and business development opportunities.

Blue Ridge Capital analyzes a company’s business model, management, financial structure, accounting practices and risks. The company uses a time line that attempts to outline catalysts for a changed valuation in the share price, although Griffin has been described as somewhat macro indifferent.

The Blue Ridge Capital portfolio update shows a total of 50 stocks, seven of them new, with a total value of $8.36 billion and a quarter-over-quarter turnover of 10%. The stocks bought by John Griffin averaged a 12-month return of 26.52%. As of Sept. 30, 2013, the Blue Ridge Capital portfolio is weighted with top sectors: consumer cyclical at 31.4%, healthcare at 14.3% and financial services at 13.5%.Here’s an update on Griffin’s three lowest P/E stocks, as of Sept. 30, 2013.

HollyFrontier Corp. (HFC)

P/E: 9.30

Weightings: 1.3%

Current Shares: 2,615,000

Value: $110,118,000

Up 2% over 12 months, HollyFrontier Corp. has a market cap of $9.61 billion; its shares were traded at around $48.25 with a P/B ratio of 1.50. The dividend yield is 2.54%.

GuruFocus currently ranks HFC with three stars out of five stars for business predictability.

Guru Action: As of Sept. 30, 2013, John Griffin made an 11% gain on his holding of 2,615,000 at an average price of $43.45 per share. He made a new buy of these shares in the second quarter of 2013 at an average price of $47.75 per share, gaining 1%.

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Twenty-First Century Fox Inc. (FOXA)

P/E: 12.90

Weightings: 1.6%

Current Shares: 3,960,000

Value: $132,700,000

Up 59% over 12 months, Twenty-First Century Fox Inc. has a market cap of $78.81 billion; its shares were traded at around $34.19 with a P/B ratio of 4.40. The dividend yield is 0.62%.

GuruFocus currently ranks FOXA with one star out of five stars for business predictability.

Guru Action: As of Sept. 30, 2013, John Griffin made a 9.7% gain on his holding of 3,960,000 shares at an average price of $31.48 per share. He made a new buy of these shares in the first quarter of 2013 at an average price of $24.75 per share, gaining 39.6%.

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Citigroup Inc. (C)

P/E: 12.90

Weightings: 3.7%

Current Shares: 6,425,000

Value: $311,677,000

Up 31% over 12 months, Citigroup Inc. has a market cap of $157.35 billion; its shares were traded at around $52.32 with a P/B ratio of 0.80. The dividend yield is 0.08%.

GuruFocus currently ranks Citigroup Inc. with one star out of five stars for business predictability.

Guru Action: As of Sept. 30, 2013, John Griffin reduced his position by 6.75%, selling 465,000 shares at an average price of $50.56 per share, for a gain of 2.6%.

Over six quarters, Griffin has averaged a gain of 15% buying 6,890,000 shares at an average price of $44.97 per share. Selling, he gained 3% on 465,000 shares at an average price of $50.56 per share.

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Here is the complete portfolio of John Griffin.

John Griffin received his MBA from Stanford University Graduate School of Business and his BS in finance from the University of Virginia’s McIntire School of Commerce. He is an adjunct professor of finance at Columbia Business School and a visiting professor at the University of Virginia.

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About the author:

Sally Jones
Sally Jones writes about Real Time Picks. She says, "I truly enjoy watching the Gurus in realtime and telling their story."

Rating: 2.0/5 (2 votes)

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