By Eric Winter
Hedge funds' 13Fs can be used by investors to gain some color on how the Wall Street heavyweights are moving around their capital. This information can be invaluable for those willing to put in the time to develop their own investing strategies around fund methodologies. We have developed a market approach of our own that has netted investors 29% since its inception in September of last year (learn more here). D.E. Shaw & Co., a firm founded by David Shaw in 1988 that currently has over $41bn in assets, has released its 13F detailing the fund's holdings for the last quarter of 2012, and we have analyzed some of its newest holdings below.
D.E. Shaw made 414 new purchases in Q4 2012, with Kraft Foods Group, Inc. (KRFT) standing out as the largest. Last October, Kraft Foods (at the time tickered as KFT) split into two companies. KRFT now assumes the North American grocery operations and Mondelez International (MDLZ) is comprised of the global snacks business. Although KRFT has reached a significant amount of market saturation with brands like Jell-O, Maxwell House and Philadelphia, income investors will appreciate KRFT's quarterly dividend of $0.50, giving the stock a high yield of 4.10%. Billionaire Israel Englander of Millennium Management bought over 600,000 shares last quarter.
ADT Corp. (ADT) was the fund's second-largest new addition with a commitment of nearly $70mm. ADT received a strong increase in reception from the 400+ hedge funds we track last quarter, with 57 funds now holding the home and small-business security provider. ADT has made significant inroads in its $13bn market as a top-tier player and continues to provide value to investors with a $600mm stock buyback program. The company's most recent earnings announcement at the end of January saw a number of positive developments, including increases in earnings and revenues from monitoring services. Steven Cohen of SAC Capital Advisors has a $13.2mm investment in ADT.
Equinix, Inc. (EQIX) made it into D.E. Shaw's portfolio as well with an investment of roughly $53mm. EQIX offers IT data solutions globally and showered investors with an excellent return in the past twelve months, amounting to an appreciation of over 56%. The company was recently upgraded to a BB rating by Standard & Poor's, prompting it to issue $1.5bn in debt with coupons ranging from 4.875% to 5.375%. Wall Street analysts have given the stock a one year mean price target that is currently 12.3% north of current levels. Famed investor Dan Loeb of Third Point recently purchased over half a million shares, according to his 13F for Q4 2012.
Cemex, S.A.B. de C.V. (CX) is a Mexico-based infrastructure and cement company that is traded on the NYSE as an American Depository Receipt. CX has been a standout performer as well, tacking on almost 50% since this time last year. The stock saw a 40% increase in popularity amongst the funds we track going into the end of 2012, with 20 funds holding the stock in Q3 2012 and 28 holding it in Q4. CX missed its already-negative EPS expectations in its latest earnings announcement on February 7th, coming in at a hefty $0.31 less than predicted. Billionaire Ken Fisher of Fisher Asset Management added slightly to his position last quarter (view his other picks here).
Eli Lilly And Company (LLY) was the last new holding made by D.E. Shaw that we'll cover, and unlike the others listed here, LLY came in the form of a call option. The pharmaceutical giant has a market cap of $60bn and an accomplished name in drug development. However, the company is facing patent losses (and has been since 2011) that are resulting in a number of generics coming to market. An example of this affecting LLY's bottom-line was revealed in its Q4 earnings announcement, which showed that the Zyprexa patent expiration resulted in 49% lower sales and depressed overall results. Daniel S. Och of OZ Management unwound his call position dramatically in the same time period.