Over the past days hedge funds have been filing their form 13-F, which is a quarterly report of equity holdings by filed 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 Zacks Investment Management
Recently the fund reported its equity portfolio, as at the end of June. The total value of the portfolio amounted to $2.69 billion, up from $2.52 billion disclosed at the end of the previous quarter. Consequently, the fund's total return was 6.5% in the last quarter. The filing revealed that at the end of June, the fund added 219 new positions to its equity portfolio, and sold out of 215 other companies. The top ten portfolio holdings as of the end of the quarter represented 16.43%. The largest changes from previous 13-F´s fillings are in the tech and energy sectors.
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 Pfizer Inc. (PFE), in which the fund disclosed a $52.8 million stake with over 1.64 million shares. Pfizer is a biopharmaceutical company that discovers, develops, manufactures and sells medicines for people and animals worldwide.
With significant competitive advantages in developing new drugs through a heavy investment in research and a broad portfolio of patent-protected drugs, the company has the largest economy of scale in the pharmaceutical industry.
Other hedge fund gurus have also been active in the company. John Hussman (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio) and Caxton Associates (Trades, Portfolio) have bought the stock in the first quarter of 2014.
Exxon Mobil Corporation (XOM) comes in next, the fund owning over 503,390 shares, worth $49.2 million. The company makes and sells a wide range of biochemicals, organic chemicals, and chromatography products.
The company’s principal business consists of the exploration for, and production of, crude oil and natural gas, manufacture of petroleum products and transportation and sale of crude oil, natural gas and petroleum products. The firm's largest competitors include BP plc (BP) and Chevron Corporation (CVX).
The company continues investing in R&D. Exxon recently focused on exploration and testing in the Gulf of Mexico, Angola, Gabon, the Faroe Islands, among others. In the U.S., the firm is making progress delivering oil sands at improving returns and shorter cycle shale.
In Wells Fargo & Company (WFC) the fund disclosed ownership of over 977,770 shares, worth $48.6 million. It is the fourth largest bank in the U.S. with assets of nearly $1.5 trillion. Founded in 1852 and headquartered in San Francisco, it provides banking, insurance, investment, mortgage and consumer finance services.
Strong Capital Ratio
The theoretical reason for holding capital is that it should provide protection against unexpected losses. This is not the same as expected losses, which are covered by provisions, reserves and current year profits. The estimated Basel III Tier 1 common equity ratio improved 23bps quarter to quarter to 10.0 % versus 9.8 % as of December 31, 2013. This ratio looks good and Wells Fargo is among the largest U.S. banks (JPMorgan, Bank of America, Citigroup, Goldman Sachs and Morgan Stanley) that has improved their Tier I common capital ratios over the last six quarters.
Other hedge fund gurus have also been active in the company. John Hussman (Trades, Portfolio), Ken Heebner (Trades, Portfolio), Caxton Associates (Trades, Portfolio) and Manning & Napier Advisors, Inc. have bought it in the first quarter of 2014.
In the next chart we can appreciate the stock’s price movements. Since 2009, the three stocks have an interesting upward trend.
As we have seen, 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 Zacks’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: Omar Venerio holds no position in any stocks or funds mentioned.