By: Hioară Dumitru
Marshall Wace is a London-based hedge fund with a U.S. equity portfolio worth over $1.5 billion, according to its latest 13F filing with the SEC. In what follows, we'll analyze the stock-specific investment strategy adopted by Paul Marshall, Chairman & Chief Investment Officer and Mr. Ian Wace, Chief Executive Officer & Chief Risk Officer, founders of the aptly named Marshall Wace. See the original 13F here.
Why pay attention?
Why is it so useful to track the 13F activity of major institutional investors? The answer is simple: it can offer retail investors a potential edge over the market. Empirical studies have shown that following the best picks of the best hedge fund managers can beat the market by as much as 18 percentage points a year.
Marshall Wace's latest 13F indicates that its equity portfolio holds a total of 120 positions; let's take a look at the top five.
Virgin Media (VMED), the British entertainment and communications giant, is the leading bet of this hedge fund, and there is no wonder about it. With its stock price steadily increasing over the past year, the company seems like a very attractive investment for any investor. Marshall Wace LLC expanded its position in this stock by 1,725,478 shares to reach 2,668,411 shares by the end of the first quarter, and importantly, it became the 28th largest institutional investor to hold the stock.
The value of this position climbed to $130.6 million, increasing by 277% from the end of the fourth quarter. Virgin Media trades at a meager trailing P/E ratio of 3.52 with an estimated forward P/E of as low as 0.25, indicating good prospects for the enterprise's value moving forward.
The best of the rest
Citigroup (C) follows up in our analysis with a positive change in value of 8%, but a decrease in the number of shares owned by Marshall Wace of 70,860. Revenue of the U.S. bank reached a record quarterly high for the last two years. Quarterly EPS climbed to its highest value since September 2011. The stock is trading at a trailing P/E ratio of 17.87 and has PEG ratio estimation (based on a 5-year outlook) of 0.73.
The snack food and beverages product company, Mondelez International (MDLZ), is next in our list with a stake in this fund's equity portfolio of 1,836,976 shares. This represents an absolute difference of 1,310,538 shares compared to the previous quarter. The value of the equity in the portfolio rose by 320%, indicating Marshall Wace LLC is bullish, and the fact that shares are in the green year-to-date. Sporting a trailing P/E of 18.20 and a forward P/E of 17.52, Mondelez is expected to increase its earnings over the intermediate term, and long-term investors have reasons to be bullish as well. Mondelez has a beta of 0.48 as well, indicating that its risk level is comfortable for even the most risk-adverse of investors.
The brand new player in Marshall Wace's equity portfolio, Micron Technology (MU), finds itself in the fourth spot, with an amount of 4,079,235 shares and a value of $40.69 million. Although Wall Street sees the company mainly as a Hold, it has managed to grow revenue of late while sporting a solid balance sheet. Shares of Micron trade at a forward P/E ratio of 16.27 and have a beta of 1.70.
News Corp (NWSA), the fifth and final member of this mega-fund's top five equity positions, saw a major boost of conviction by Marshall Wace in the first quarter. The stake grew by 628,010 shares, reaching 1,251,044 in total, while the position's value rose by over 140%, as shares are trending upwards. News Corp has shown some good results of late, with a trailing EPS of $1.67 and a forward P/E ratio of 17.25-not overly expensive by any means. Due primarily to top and bottom line strength, most of the analysts who track News Corp recommend it as either a Buy or a Strong Buy-15 and 7, respectively.
Marshall Wace has increased the size of its equity portfolio from 84 positions to 120 in just one quarter, and the total value of the 13F filing has nearly tripled quarter-over-quarter. This fact alone makes it important for piggyback investors to pay attention to this fund.