Andreas Halvorsen (Trades, Portfolio)’s long portfolio Viking Global Investors valued at over $16 billion was a whirl of activity in the final months of the year, reflecting a 26% turnover.
Out of 59 stocks, Viking Global established 19 positions in the fourth quarter. Halvorsen is among several high-profile investors who have been accumulating millions of shares in entertainment giant Time Warner Inc. (TWX, Financial), in anticipation of its court showdown with the U.S. Department of Justice. In November, DOJ filed a civil antitrust lawsuit to block AT&T’s planned $108 billion acquisition of Time Warner. DOJ asserts the merger would harm competition, sparking high bills and less innovation for millions of Americans. The trial is set to begin this month.
Halvorsen’s No. 2 top pick was NetEase Inc. (NTES, Financial), an internet provider of Chinese language content, whose stock has skyrocketed in recent years.
The fund’s major additions included a 190% increase in shares of Anthem (ANTM, Financial) and a 473% jump in shares of Dominos Pizza (DPZ, Financial).
Halvorsen reduced a position in Alphabet Inc. (GOOGL, Financial) by 32% and in Visa Inc. (V) by 25%. The guru earned a gain of 37% in shares of Alphabet since he began purchasing them in the third quarter of 2014.
Its top sells marked shares of Twenty-First Century Fox Inc. (FOXA, Financial), Bank of America Corp. (BAC, Financial), Mastercard (MA, Financial) and Verizon Communications (VZ, Financial).
Fundamentals
The Greenwich, Connecticut-based firm uses fundamental analysis to select private and public investments. They primarily investigate a company’s business model, fundamentals and quality of management.
Halvorsen founded Viking in 1999, after ending his tenure at Julian Robertson (Trades, Portfolio)’s Tiger Management. Former employees like Halvorsen who began their own hedge fund firms are dubbed “tiger cubs.”
In the fourth quarter, more than 25% of the portfolio is invested in technology. About 19% is in consumer cyclical, 15.7% in financial services, 14% in healthcare, 12.6% in energy and 10.8% in industrials. The remainder is in ETFs, options and consumer defensive.
In all, Halvorsen manages a hedge fund valued at more than $24 billion.
Forbes reported that the hedge fund lost 4% after fees in 2016, its worst year since its inception.
Time Warner
Halvorsen launched a position in Time Warner for an average price of $94.52 a share. The new holding sits in about 2.58% of the portfolio. He purchased over 4.5 million shares.
The company owns television networks, including HBO, CNN, TNT and the CW. It mainly creates and distributes movies and TV programming.
In late 2016, AT&T announced it was buying the entertainment giant for $85.4 billion but the acquisition has taken months to consummate as a result of anti-trust concerns and other issues. The Justice Department sued to block the acquisition.
The New York City-based Time Warner has price-earnings ratio of 14.27 versus a median of 20.82. It has a price-book ratio of 2.59 versus a median of 1.85 and a price-sales ratio of 2.39 versus a median of 1.85.
Time Warner’s dividend yield is 1.69% and it has a dividend payout ratio of 0.24.
It has a market cap of $73.77 billion.
GuruFocus reports it posted $31 billion in revenue for the trailing 12 months. Its 12-month trailing earnings per share is $6.63. The stock’s 52-week range is $85.88 to $103.90 per share.
The stock was trading at $94.60, up 1% in afternoon trading on Monday. About 779,000 shares are outstanding.
The Peter Lynch chart suggests the stock is overpriced. The median is $79.20 a share.
Revenue growth is 4% over the last 10 years and operating income has grown by 12.6% in the last five years.
GuruFocus ranks it a 5 in 10 in financial strength and a 7 in 10 in profitability and growth. It rates a Business Predictability ranking under GuruFocus standards of one-star.
NetEase Inc.
Shares of NetEase Inc. were up by 1.46% in Tuesday morning trading at under $300 a share.
The online media company represents just over 2% of the portfolio and sold for an average price of $312 a share. Viking Global bought over 983,000 shares.
NetEase key services include online/mobile games, media, email and e-commerce. The company develops and operates some of the China's most popular PC client and mobile games, and it partners with global leading game developers, such as Blizzard Entertainment and Mojang (a Microsoft subsidiary). Since 2014, NetEase has rolled out e-commerce services, riding the tailwind of increased demand for high-quality products.
The company has a financial strength of 8 in 10 and a profitability and growth of 9 in 10. Its Business Predictability Rating is five-stars, highlighting stocks with an average gain of 12% a year.
In the last three years, the stock price has skyrocketed by as much as 193%. In the last six months, it has risen by 9%.
NetEase has a market cap of $38 billion.
Its price-earnings ratio is 24.66 versus an industry median of 30.40 and its price book-ratio is 5.62 and its price-sales ratio is 4.85.
Some warnings signs include a declining gross margin and that asset growth has been faster than revenue growth.
The company’s total trailing 12-months revenue is more than $8 billion and its earnings per share is 11.96.
The Peter Lynch chart suggests the company’s stock is overvalued.
Top sells
Top sells included Twenty-First Century Fox Inc., which held almost 2% of his portfolio space. The shares were going for an average of $29.81 in the fourth quarter.
Halvorsen also sold out on shares of Bank of America Corp. and Verizon Communications. Bank of America shares sat in 1.2% of the portfolio. The average price for the quarter was nearly $117 a share. Verizon sat in 1.19% of portfolio space. Shares were trading at an average price of just over $49 a share.
