Over the past days hedge funds have been filing their form 13-F, which is a quarterly report of equity holdings for institutional investment managers with at least $100 million in equity assets under management, as required by the United States Securities and Exchange Commission (SEC). In this article, let's concentrate in one particular hedge fund and try to see the principal holdings in its portfolio. I will look into Gotham Asset Management LP in which Joel Greenblatt (Trades, Portfolio) and Robert Goldstein serve as Managing Principals and co-CIOs for Gotham, with over 50 years of combined investment experience.
Recently the fund reported its equity portfolio, as at the end of last year. The total value of the portfolio amounted to $4.2 billion, up from $3 billion disclosed at the end of the previous quarter. Consequently, the fund's total return was 40% in the last quarter. The filing revealed that at the end of last year, the fund added 219 new positions to its equity portfolio, and sold out of 150 other companies. The top ten portfolio holdings as of the end of the quarter represented 6.3%. The largest changes from previous 13-Fs fillings are in the technology sector (1.6%) followed by industrials and telecom (around 1% each).
In this article, we have selected three companies, in which the fund holds the largest stakes, in terms of market value.
The first on the list is Cisco Systems Inc. (CSCO), in which Gotham disclosed a $26.3 million stake with over 1.17 million shares. Cisco is the world's largest supplier of high-performance computer networking systems. The firm continues strengthening its focus on corporate software and technology services, which we see as a main driver in the current years. In the last quarter of 2013, the firm reported a decline in earnings per share in the most recent quarter compared to the same quarter a year ago. Cisco increased its bottom line by earning $1.86 versus $1.49 in the prior year. It has a proven commitment to returning cash to investors, with a current dividend yield of 3.1% which is considered good to protect investor´s purchasing power. Other hedge fund gurus have also been active in the company. Ray Dalio (Trades, Portfolio) and RS Investment Management (Trades, Portfolio) have bought in it in fourth quarter 2013.
Hewlett-Packard Company (HPQ) comes in next, the fund owning over 674,640 shares, worth $18.8 million. The company is a leading maker of computer products, including printers, servers and PCs, and has a large service and support network. It operates in a highly competitive industry, including companies such as Apple (AAPL), IBM (IBM) and Dell (DELL). The firm's strategy is to diversify its business through acquisitions, adding services, hardware and solutions for data centers and for mobile computing. We believe that HP will expand its software for data centers aiming to boost results in the long term. Other hedge fund gurus have also been active in the company. Gurus like Paul Tudor Jones (Trades, Portfolio) and Prem Watsa (Trades, Portfolio) have bought in it in fourth quarter 2013.
In Microsoft Corporation (MSFT) Gotham disclosed ownership of over 468,480 shares, worth $17.5 million. The company reported revenues rose by 14.3% in the most recent quarter compared to the same quarter a year ago. It has a solid financial position with reasonable debt levels and the stock price surged by 35% over the past year.
In the next chart we can appreciate the stock’s price movements. Since 2012, the three stocks have an upward trend.
All of the stocks still have good upside potential despite the fact that they have already risen in the past year. The three stocks are certainly attractive for fundamental investors and make it a worthy investment for Gotham’s portfolio. In future articles we are going to calculate the intrinsic value of these stocks to determine if they are a good buy in terms of valuation.
Disclosure: Damian Illia holds no position in any stocks mentioned.