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 changes in its portfolio. I will look into Absolute Return Investors LLC which is a U.S.-based hedge, led by Jonathan Goodman.
Recently the fund reported its equity portfolio, as at the end of last year. The total value of the portfolio amounted to $9.1 billion, up from $7.2 billion disclosed at the end of the previous quarter. Consequently, the fund's total return was 20.82% in the last quarter. The filing revealed that at the end of last year, the fund added 160 new positions to its equity portfolio, and sold out of 99 other companies. The top ten portfolio holdings as of the end of the quarter represented 12.63%.
The largest portion of the Absolute Return Investors is held in the Industrials sector (15.7%) followed by Energy and Health Care stocks (around 14% in each). The portfolio composition of the fund has changed slightly over the last month. Its portfolio composition by sector as of Feb. 14, 2014, is:
ABSOLUTE RETURN INVESTORS LLC
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 Exxon Mobil Corporation (XOM, Financial), in which Absolute Return disclosed a $180.74 million stake with over 1.79 million shares. The world´s largest publicly traded oil company had an upward trend in its stock price as we can appreciate in the next chart:
In the last quarter of 2013, Exxon has reported solid financial results in the form of an 8.8% increase in revenues compared to the same quarter one year prior. The net income has decreased by 16.1% to $8.35 billion, from $9.95 billion in the fourth quarter of the previous year.
A key driver for growth will be international operations in regions such as Canada, Kazakhstan, West Africa, Australia, Russia, Angola and Iraq. Moreover, the company is engaged in a large liquefied natural gas project in Papua New Guinea. An interesting feature of the company is its proven commitment to returning cash to investors. The current dividend yield is 2.76%, which is considered enough to protect the purchasing power.
Other hedge fund gurus have also been active in the company. Jeremy Grantham (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Richard Pzena (Trades, Portfolio), Tom Gayner (Trades, Portfolio), Ken Fisher (Trades, Portfolio) and Donald Yacktman (Trades, Portfolio) have also invested in it.
Procter & Gamble Co. (PG, Financial) comes in next, the fund owning over 1.93 million shares, worth $157.3 million. The company reported a slightly increased 0.5% in revenues compared to the same quarter one year prior. The firm reported mixed fiscal second-quarter 2014 results beating the Zacks Consensus Estimate. This is another company which returns cash to investors. The current dividend yield is 3.03%, which is considered good enough to protect the purchasing power. In fiscal 2013, the firm reduced its cost of goods and divested its underperforming bleach business in Italy, for example. These actions will improve productivity in 2014.
In Chevron Corporation (CVX, Financial), Absolute Return disclosed ownership of over 1.17 million shares, with a reported value of $146.13 million. It also divested in non-core and high-cost assets, in order to concentrate more on the discovery of oil and gas, its principal business. Chevron also pays a (growing) dividend and is currently yielding 3.52%.
In the next chart we can appreciate the stock’s price movement. All of them have an upward trend for the 10-year period.
The three stocks are certainly attractive for fundamental investors and make it a worthy investment for Absolute Returns’ 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: Victor Selva holds no position in any stocks mentioned.
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