Here's What This $5 Billion Hedge Fund Company Is Buying
Every quarter, many money managers have to disclose what they've bought and sold, via "13F" filings. Their latest moves can shine a bright light on smart stock picks.
Today, let's look at Eton Park a major headge fund company founded by Eric Mindich in 2004. Mindich had spent 15 years at Goldman Sachs before that, becoming, at age 27, its youngest partner. Mindich invests in both long and short positions on stocks, and in private equity investments, and specializes in merger arbitrage. He reportedly nearly tripled the value of Eton Park in its first seven years, but has posted some bumpy results lately, resulting in some shareholders pulling out.
The company's reportable stock portfolio totaled $5 billion in value as of March 31, 2013.
So what does Eton Park's latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are call options on Marathon Petroleum and puts on Intel. Other new holdings of interest include Baidu and Cheniere Energy . Chinese search-engine giant Baidu has been hurt by China's economic growth slowing as well as by tough competition, such as from Qihoo 360. (Baidu investors have taken heart lately, though, that it's biting back at Qihoo.) Its last earnings report was disappointing (despite many impressive numbers), but its long-term prospects remain solid, as much of China and Asia has yet to get online. Some see the stock as attractively priced, and like its profitability and growth prospects, such as in video.
Cheniere stock has more than doubled over the past year, on great expectations for its planned liquid natural gas (LNG) export terminal, which is "primed for solid gains" in 2015. The terminal will help it ship gas procured relatively inexpensively here to regions where it fetches higher prices. Cheniere is facing greater competition lately, though, as more companies seek approval to transport natural gas to nations without free-trade agreements with the U.S. Exporting a lot of gas could result in rising prices for it here at home, too. Meanwhile, bears note that the company has been posting net losses and negative free cash flow for many years now.
Among holdings in which Eton Park increased its stake was priceline.com . Some might think that the stock is overpriced, with a recent P/E ratio near 28, and a forward P/E close to 18. But the stock has been growing at double-digit rates over the past years (though those growth rates have slowed some). Its free cash flow and profit margins have also been growing as the company expands internationally. The company has been growing, in part, via savvy acquisitions, most recently gobbling up Kayak.com. It's also borrowing a billion dollars, with which to buy back shares.
Eton Park reduced its stake in companies such as Corrections Corp. , a private prison operator that recently changed to REIT (real estate investment trust) status. REITs have to pay out most of their earnings as dividends, so Corrections offers a tasty payout, recently yielding 5.8%. Some aren't comfortable with the company's business, but bulls like its competitive advantages -- new rivals can't just easily spring up, for example -- and reliable cash flow.
Finally, Eton Park's biggest closed positions included Nexen and Huntington Ingalls Industries. Other closed positions of interest included Best Buy . A look at some headlines for articles about Best Buy reveals that Eton Park isn't the only one skeptical about it: "Best Buy Stock Will Only Break Your Heart," "Best Buy Is Laughing At You," "Is Best Buy a Sucker's Bet?" The company is generating free cash flow, but its earnings just dropped into the red. Bulls are hopeful about its stores-within-stores, such as mini-Apple stores, but bears worry about falling revenue and earnings.
We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing. Therefore, 13-F forms can be great places to find intriguing candidates for our portfolios.
The article Here's What This $5 Billion Hedge Fund Company Is Buying originally appeared on Fool.com.Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, owns shares of Apple, Intel, Baidu, and Priceline.com. The Motley Fool recommends Apple, Baidu, Corrections of America, Intel, and Priceline.com. The Motley Fool owns shares of Apple, Baidu, Huntington Ingalls Industries, Intel, and Priceline.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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