By Alex Oleinic
David Harding, the founder and manager of Winton Capital Management, is one of the most prominent investors of our time. Harding's fund is one of the 500-plus funds we track and it has filed its latest 13F for the first quarter. We're going to take a look at its five largest new positions; the fund added 28 stocks altogether. The original form can be seen here.
Why is this important?
Quantitative studies have shown that it can benefit retail investors to watch hedge fund sentiment. According to our research, those who follow specific hedge fund activity can outperform Mr. Market by as much as 18 percentage points per year (discover the secrets of this strategy).
Among the new picks of Winton Capital, we should first mention Actavis (ACT), in which the fund disclosed a $13 million stake. According to the latest 13F, the fund owns 141,671 shares of the company. The stock of Actavis has posted a year-to-date return of above 32.5%, and sports a forward P/E of 12.2x. Actavis has the largest market cap among those officially listed in the generic drugs industry, of $13.6 billion.
The best of the rest
Next on the list is Kellogg Company (K). Winton Capital reported a stake of 197,622 shares in the company. The holding is worth $12.7 million. For the first quarter of 2013, Kellogg reported earnings worth $311 million, which is equal to $0.85 per diluted share, against an EPS of $0.98 per diluted share a year earlier. The stock of Kellogg is trading at a forward P/E of 15.4x and has a year-to-date return slightly above 15%.
Dun & Bradstreet (DNB) is represented by a stake of 138,566 shares. The value of the holding is about $11.6 million in Winton's 13F portfolio, and according to our database, more than 10 of the hedge funds we track were bullish on the stock heading into 2013. Dun & Bradstreet shares sport a year-to-date return of almost 18%, and with a P/E of 8.8x, Dun & Bradstreet is one of the cheapest companies in the Information & Delivery Services industry, with its closest peer, FactSet Research Systems (FDS), trading at a P/E of 22x.
We should also mention PVH Corp (PVH), as Winton Capital owns 90,474 shares worth a value of approximately $9.7 million. PVH isn't particularly cheap, as it has the 16th highest P/E among its peers in the apparel clothing textile industry (20.1x), and it has returned a decent but unspectacular 7% year-to-date. Out of the funds we track, more than 30 were long PVH heading into 2013, though, as many investors are likely bullish on its growth prospects. Wall Street expects the company's bottom line to expand by 12% a year over the next half-decade, higher than peers like True Religion (TRLG) and Columbia Sportswear (COLM) significantly.
Last but certainly not least is Deere & Company (DE), in which the fund disclosed a $5.7 million position at the end of Q1. Deere has a similar, mid-sized level of hedge fund interest as that which surrounds PVH, and its shares have returned a modest 5.8% year-to-date. The real play with Deere looks to be its value at a forward P/E of 10x, and with a market cap of $35.9 billion, Deere is the second-largest company in terms of market cap in the farm and construction machinery space.
It is good to look at the new positions of large hedge funds such as Winton Capital, as it is important to follow the latest moves from the upper-tier of money managers. We can see that David Harding has made some interesting plays into new companies, which are leaders in their respective industries. In this way, Mr. Harding shows a conviction in his holdings and hence, the fund will provide a nice starting point for piggy backers.