By Matt Doiron
Jeffrey Vinik is the former manager of Fidelity's Magellan Fund (which he ran from 1992 to 1996) and his own hedge fund. He returned capital to outside investors in 2000 but still manages his own wealth (he has become a billionaire from his investing success) and that of friends and family. The most popular stocks among hedge funds and prominent investors outperformed the market on the average (check out the details here). We have gone through his most recent 13F filing, which reported many of his long equity positions as of the end of December. Here are our thoughts on the five largest single-stock positions by market value that Vinik reported in his 13F (compare these picks to previous filings).
Vinik likes gold: he has a large position in Market Vectors Gold Miner ETF (GDX) and his top stock pick was Barrick Gold Corporation (ABX), a global gold miner with a market capitalization of over $32 billion. Barrick's stock price has dropped 35% in the last year, which in the eyes of Wall Street analysts has left it at an attractive price. The consensus for 2013 is for $4.46 in earnings per share, which would make for a current-year P/E of 7. We wouldn't take analyst expectations at face value, and wouldn't want to be too dependent on gold prices, but that might be cheap enough to be worth a look. Fellow billionaire Kerr Neilson's Platinum Asset Management has been another major shareholder of Barrick (see Platinum's stock picks).
Vinik added shares of Best Buy Co., Inc. (BBY), closing 2012 with 7.8 million shares in his portfolio. Best Buy is up over 40% year to date as company founder Richard Schulze has made some serious steps forward in his quest to take the electronics retailer private, though recently it has been reported that private capital might be balking. Best Buy has been hammered by competition from Amazon (AMZN) and other retailers, and 15% of the outstanding shares are held short. At its current price, the stock does pay a high dividend yield, but shareholders would be vulnerable to any abandonment of the buyout.
Cameco Corporation (CCJ) was another of the billionaire's favorite stocks, with the 13F disclosing a position of 4.2 million shares. Cameco is an $8.5 billion market cap uranium miner and producer, and an electric utility. The company's margins have been collapsing, with earnings falling over 80% between the fourth quarter of 2011 and last quarter even though revenue was down only slightly. The sell-side expects it to recover slightly, but even the forward earnings multiple (for 2014) looks a bit high at 17; as a result we would avoid the stock, at least for now, on valuation.
Vinik had nearly eliminated his stake in Facebook Inc (FB) during the third quarter of 2012, but at some point last quarter he began buying heavily, allowing him to own 2.8 million shares of the social network at the beginning of this year. Facebook has also been one of Tiger Global's top picks. However, despite high revenue growth, we still think that Facebook is more likely to be overvalued at a forward P/E of 36 (with analyst estimates assuming high earnings growth over the next couple years) and we don't think it's a good stock to buy.
Packaging Corp Of America (PKG) rounded out Vinik's top five stock picks, thanks to an increase from about 960,000 shares at the beginning of October to 1.8 million shares by the end of the fourth quarter. At a market capitalization of $3.9 billion, the company is valued at trailing and forward P/E multiples of 24 and 13, respectively. The company has actually been growing nicely, reporting earnings growth of 55% in its most recent quarter compared to the same period in the previous year, and so it could in fact turn out to be a growth stock; we wouldn't expect that given the industry, but it might be worth evaluating more closely. Packaging Corp pays a dividend yield of just above 3%.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.