Hedge Fund Emerging Sovereign Group's Top Stock Picks

by: Insider Monkey

By: Alex Oleinic

Tracking 13Fs is important because they reveal the latest moves made by hedge funds each quarter. Usually, institutional investors are required to file their 13F forms with the Securities and Exchange Commission within 45 days after the end of each calendar quarter. Emerging Sovereign Group, managed by J Kevin Kenny Jr, is one of the hedgies we track, and we'll focus in on their top five equity positions. The original 13F can be seen here. We are looking into the five largest holdings in terms of value because it can benefit retail investors by watching hedge fund sentiment (learn the secrets of this strategy here).

The leader

Yum! Brands (NYSE:YUM) is a new position in the 13F portfolio of Emerging Sovereign. The fund disclosed owning 1,970,750 shares, worth $141.8 million. The EPS of Yum! Brands declined by an annual 24% to $0.72. The company has the second-largest market cap among restaurant stocks. With a market cap outpaced only by McDonald's, over 30 of the hedge funds we track held shares of Yum! heading into 2013.

In second place is situated Nielsen Hldg NV (NYSE:NLSN), represented by a $111.2 million stake in the equity portfolio of Emerging Sovereign. The hedge fund reported ownership of 3,103,089 shares, up from 2,377,497 shares mentioned at the end of 2012, the previous value of the stake being $72.7 million. The stock of Nielsen has posted a YTD return of above 14% and sports a forward P/E of 15.4x.

The best of the rest

Cognizant Technology Solutions (NASDAQ:CTSH) has also made the list, the hedge fund reporting ownership of 1,441,630 shares, up from 1,194,470 shares disclosed at the end of last year. The value of the stake jumped to $110.5 million, from $88.3 million. Cognizant posted a diluted EPS of $0.93 on GAAP basis, up from $0.79 reported a year earlier. The year-to-date return of Cognizant is almost -12%, against the overall return of the IT industry that amounts to slightly above 9%. Out of the funds we track, 30 hedge funds, including Emerging Sovereign, were invested in Cognizant in the previous round of 13Fs.

Mead Johnson Nutrition (NYSE:MJN) also deserves our attention. Emerging Sovereign disclosed owning 1,223,708 shares, the stake advancing from 1,135,480 shares. The value of the equity surged to $94.8 million, from $74.8 million. The stock of Mead Johnson sports a year-to-date return of above 20%. According to our database, more than 30 hedge funds were bullish on Mead Johnson at the end of 2012. Mead Johnson has the 13th highest P/E in its industry, which is 26.3x, among companies from the processed & packaged goods industry.

Last on our list is Priceline.com (NASDAQ:PCLN). The hedge fund owned 137,018 shares, worth $94.3 million at the end of March. In the previous round of 13F filings, the fund disclosed an $80.9 million holding, containing 130,333 shares. The year-to-date return of Priceline.com is above 23%, versus an overall return for the leisure industry of 9.47%. The stock is trading at a forward P/E of 16.4x, according to data from Morningstar. Priceline.com reported non-GAAP net income of $5.76 per diluted share, versus $4.28 per share posted in the first three months of 2012. For the second quarter of 2013, the company expects non-GAAP net income in the range $8.87-9.45 per diluted share.

Final thoughts

The Emerging Sovereign Group has disclosed holding stakes in 26 companies at the end of March, up from the 19 reported in the previous quarter. The total value of the equity portfolio of the hedge fund managed by J Kevin Kenny Jr surged to $1.7 billion, from $971.7 million in the last 13F. Continue preparing for 13F-filing season here.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: This article is written by Insider Monkey's writer, Alex Oleinic, and edited by Jake Mann. They don't have any business relationships with any of the companies mentioned in this article and they didn't receive compensation (other than from Insider Monkey and Seeking Alpha) to write this article.