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 Citadel Advisor LLC from Kenneth C. Griffin, a Chicago-based investment firm.
Recently the fund reported its equity portfolio, as at the end of last year. The total value of the portfolio amounted to $53.6 billion, up from $49.2 billion disclosed at the end of the previous quarter. Consequently, the equity market change value in the last quarter was $2.2 billion. The filing revealed that the fund added 475 new positions to its equity portfolio, and sold out of 459 other companies. The top ten portfolio holdings as of the end of the quarter represented 7%.The largest changes from previous 13-F´s fillings are in the consumer staples sector (1%) and technological stocks (minus 2.1% 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 Baker Hughes Incorporated (BHI, Financial), in which Citadel disclosed a $415 million stake with over 6.38 million shares. The company is a supplier of oilfield services, products, technology and systems to the oil and natural gas industry. It focuses on international markets improving profitability from the Gulf. With competitive technologies, we think it will bolster its activity in the deepwater Gulf of Mexico and in the future can be scaled up to other offshore and deepwater markets across the world. Other hedge fund gurus have also been active in the company. Ray Dalio (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), John Hussman (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Jim Simons (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), John Buckingham (Trades, Portfolio) and Manning & Napier Advisors, Inc. and Dodge & Cox have taken long positions in the third quarter of 2014.
Danaher Corp. (DHR, Financial) comes in next, the fund owning over 5.32 million shares, worth $404.4 million.
The company reported earnings per share increased by 13% in the most recent quarter compared to the same quarter a year ago. As we can see in the next chart, it has demonstrated a pattern of positive EPS growth over the last years.
The gross profit margin is considered rather high, at 57.62%, and it has increased from the same quarter the previous year. The net profit margin of 13.97% is ranked higher than 93% of the 2030 Companies in the Diversified Industrials industry. So looking at these ratios, every investor could find it attractive to bet on this stock. Other hedge funds like Larry Robins, Steven Cohen (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), John Burbank (Trades, Portfolio), Chuck Akre (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Bill Frels (Trades, Portfolio), Murray Stahl (Trades, Portfolio) and Jeremy Grantham (Trades, Portfolio) as well as Dodge & Cox and RS Investment Management (Trades, Portfolio) have taken long positions.
In Cimarex Energy (XEC, Financial) Citadel disclosed ownership of over 3.11 million shares, worth $392.9 million. This is other company with very attractive margins. The gross profit margin is currently very high, at 70.86% and the net profit margin of 22.21% is ranked higher than 92% of the 1093 Companies in the Oil & Gas E&P industry. Jim Simons (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), Ken Fisher (Trades, Portfolio) and First Pacific Advisors (Trades, Portfolio), FPA Capital Fund (Trades, Portfolio) and Diamond Hill Capital (Trades, Portfolio) have taken long positions on the stocks.
Final Comment
In the next chart we can appreciate the stock’s price movement. All of them have an upward trend for the 5-year period.
According to Yahoo! Finance, the estimated one-year target share prices for the stocks and the returns are:
| Company | 1 Year Forward Price | Current Price | Price Appreciation | Div. Yield | Total Return |
| Baker | 69.57 | 64.41 | 8.0% | 1.10% | 9.1% |
| Danaher | 88.34 | 82.51 | 7.1% | 0.50% | 7.6% |
| Cimarex | 155.87 | 119.59 | 30.3% | 0.50% | 30.8% |
| 45.4% | 2.1% | 47.5% |
So for holding the stocks one year, the total expected return is 47.5%. The three stocks are certainly attractive for fundamental investors and make it a worthy investment for Citadel’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 mentioned.
