Billionaire and pioneer of the long-short hedging strategy Julian Robertson (Trades, Portfolio) closed two stock transactions in the third quarter, his most frugal in exactly five years as he feared a market bubble fueled by years of loose monetary policy would culminate in chaos and groused in the media about the hedge fund business.
Robertson, who founded the investment firm Tiger Management Corp. in the ‘80s, predicted and avoided the tech bubble by refusing to own fly-by-night internet stocks in 1999. The impending bubble burst, he told Bloomberg Surveillance’s Primetime on Sept. 27, would originate in the bond market defined by low yields and high prices, then spread to banks that own the negative-yielding bonds and spill into real estate.
“I think the prospects of a bubble make it if we have that bubble burst, you’re not going to make any money in the stock market unless you’re short and unless you’re in some sort of hedge fund,” he said.
Robertson also said hedge fund returns were suffering because too much talent had concentrated in the industry, but that active managers tend to do better in downturns such as the one he expects soon, according to Yahoo Finance.
Robertson has 34 positions in his $423 million portfolio. His favored sectors are health care, where he has 27.9% of holdings, and technology, where he has 24.9% of them.
In the third quarter he bought The Priceline Group Inc. (PCLN, Financial) and Bristol-Myers Squibb Company (BMY, Financial).
The Priceline Group Inc. (PCLN, Financial)
Robertson purchased 16,500 shares of The Priceline Group, a 5.74% portfolio holding. The stock’s third-quarter average price was $1,394 per share.
The Priceline Group Inc. has a market cap of $69.7 billion; its shares closed Monday at $1,489.18 with a P/E ratio of 37.96 and P/S ratio of 7.21. The Priceline Group Inc, had an annual average earnings growth of 48.5% over the past 10 years. GuruFocus rated The Priceline Group Inc. the business predictability rank of 5-star.
Bristol-Myers Squibb Company (BMY, Financial)
Robertson purchased 400,800 shares of Bristol-Myers Squibb Company, a 5.11% portfolio holding. The stock’s third-quarter average price was $64.
Bristol-Myers Squibb Company has a market cap of $94.52 billion; its shares closed Monday at $56.56 with a P/E ratio of 28.30 and P/S ratio of 5.11. The trailing 12-month dividend yield of Bristol-Myers Squibb Company stock is 2.7%. The forward dividend yield of Bristol-Myers Squibb Company stock is 2.7%.
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