In recent 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 Abner Herrman & Brock LLC, which provides portfolio management for high net worth individuals, endowments, and corporate retirement plans.
Recently the fund reported its equity portfolio, as of the end of December. The total value of the portfolio amounted to $197.2 million, down from $339.4 million disclosed at the end of the previous quarter. The filing revealed that, at the end of December, the fund added four new positions to its equity portfolio and sold out of 36 other companies. The top 10 portfolio holdings as of the end of the quarter represented 37.28%. The largest changes from previous 13-F´s fillings are in the energy, health care and financial sector.
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 Merck & Co. (MRK, Financial), in which the fund disclosed a $10.4 million stake with over 183,220 shares. The company is a leading global drugmaker, producing a wide range of prescription drugs in many therapeutic classes in the U.S. and abroad.
The firm is making efforts to reduce costs in order to offset the losses from patent expirations of high-margin products. With the acquisition of Schering-Plough, the company gained total rights to certain attractive products such as Zetia and Vytorin. Moreover, the deal is expected to generate $5 billion in annual cost-saving synergies by 2015.
Merck has improved earnings per share by 877% in the most recent quarter compared to the same quarter a year ago, from $0.26 to $2.54. The net income increased by 836.7% when compared to the same quarter one year before, from $781.00 million to $7,316.00 million.
Further, 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. Joel Greenblatt (Trades, Portfolio), James Barrow (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Bill Frels (Trades, Portfolio) have added the stock in the last quarter of 2014, as well as PRIMECAP Management (Trades, Portfolio), Vanguard Health Care Fund (Trades, Portfolio), Manning & Napier Advisors, Inc. and NWQ Managers (Trades, Portfolio).
Pzifer Inc. (PFE, Financial) comes in next, the fund owning over 262,950 shares, worth $8.2 million. It is one of the world's largest pharmaceutical companies, offering a wide range of drugs across a broad therapeutic spectrum.
If you had invested $10,000 five years ago, today you could have $23,471, which represents a 18.6% compound annual growth rate (CAGR).
It has reported strong earnings declined of 50% but the stock has surged by 13% over the past year. During the past fiscal year, the company reported lower earnings. It earned $1.42 versus $1.65 in the previous year. This year, Wall Street expects an improvement in earnings ($2.08 versus $1.42).
Other hedge fund gurus have also been active in the company. Richard Pzena (Trades, Portfolio), Jean-Marie Eveillard (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Steven Cohen (Trades, Portfolio), John Keeley (Trades, Portfolio), Murray Stahl (Trades, Portfolio), Bill Frels (Trades, Portfolio), James Barrow (Trades, Portfolio), Robert Bruce (Trades, Portfolio) and Charles Brandes (Trades, Portfolio) have added the stock in the last quarter of 2014, as well as Pioneer Investments (Trades, Portfolio), Vanguard Health Care Fund (Trades, Portfolio), RS Investment Management (Trades, Portfolio), Manning & Napier Advisors, Inc. Bestinfond (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio) and NWQ Managers (Trades, Portfolio).
In Bristol-Myers Squibb Company (BMY, Financial) the fund disclosed ownership of over 138,330 shares, worth $8.2 million. The company is a leading global drugmaker, with strengths in cardiovascular, anti-infective and anticancer therapeutics.
If you had invested $10.000 five years ago, today you could have $30.408, which represents a 24.9% compound annual growth rate (CAGR).
The firm has built a strong portfolio due to its acquisitions and partnerships. Further, it has sold off business lines. For example, it has closed nearly 50 drugs that now are developed through partnerships with other drug and biotechnology companies.
Other hedge fund gurus have also been active in the company. Steven Cohen (Trades, Portfolio), Ruane Cunniff (Trades, Portfolio), Jim Simons (Trades, Portfolio), Irving Kahn (Trades, Portfolio), Mario Gabelli (Trades, Portfolio) and Bill Frels (Trades, Portfolio) have taken long positions in it in the last quarter of 2014, as well as Dodge & Cox and Vanguard Health Care Fund (Trades, Portfolio).
Final comment
In the next chart we can appreciate the stock’s price movements. Since 2009, 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 Abner’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.
