By: Alex Oleinic
Several weeks after the end of each calendar quarter, hedge funds are required to file their 13F forms with the Securities and Exchange Commission, where they disclose all of their equity holdings from the previous three-month period. One of these funds is the New York-based Levin Capital Strategies managed by John A. Levin. We'll take a look at the hedgie's 5 most valuable positions at the end of Q1.
Quantitative studies have demonstrated that those who follow specific hedge fund activity have the potential to beat Mr. Market significantly (learn the secrets of this strategy here), so it's important to pay attention.
Pfizer in the lead
Levin Capital has announced a $239 million position in Pfizer Inc. (PFE). The fund currently owns 8,280,579 shares of Pfizer, down from 8,849,557 shares disclosed at the end of December. The previous value of the stake was $221.9 million. Among major drug manufacturers, Pfizer has the second-largest market cap of $206.37 billion, being outrun only by Johnson & Johnson, whose market cap amounts to $240.89 billion. With a stock that has a year-to-date return of around 15.6%, Pfizer is one of the best peers in an equity portfolio of any hedge fund, which is why at the end of last year, over 70 of the funds we track were bullish.
Eaton Corporation (ETN) is the next on the list. John A. Levin's fund reported owning 3,738,628 shares of the company, down from 4,252,794 shares held at the end of December. The value of the position slightly declined to almost $229 million, from $230.4 million. At the end of last year, Eaton was the largest holding of Levin Capital in terms of value. The stock of Eaton has a year-to-date return of above 19% and is trading at a forward P/E of 12.4x. More than 30 funds from our database held heading into 2013, so we'll be watching this power management player.
The best of the rest
In Medtronic, Inc. (MDT), the fund reported a $227.6 million position, up from $181.1 million posted at the end of last year. Currently, the fund owns 4,847,576 shares of Medtronic versus 4,414,142 shares mentioned in the previous 13F. Medtronic, which has a market cap of $49.85 billion, is the second-largest company in the medical appliances & equipment industry, with the first being Abbott Laboratories (ABT) (market cap of $56.38 billion). The stock of Medtronic has a year-to-date return around 20.5%, higher than the overall return of the medical devices industry, which is slightly below 15%, according to Morningstar.
Citigroup Inc. (C) is represented in the equity portfolio of John A. Levin's fund by a $220.2 million position, which contains 4,976,904 shares. In the previous 13F the fund disclosed holding 4,070,198 shares, worth $160 million. Citigroup, which could be found in the equity portfolio of over 100 funds we track, has a year-to-date return of 23.2%, the seventh largest in the Global Banking industry, and higher than the total return of the industry, which amounts to slightly above 14%.
Merck & Co (MRK) is the fifth most valuable holding in the 13F filing of Levin Capital. The fund reported owning 4,600,773 shares, worth about $203.4 million. In the previous round of 13F filings with the SEC, Levin Capital disclosed holding 3,095,080 shares, the value of the stake amounting to $126.7 million. Merck sports a P/E of 23.4x, fourth largest among the major drug manufacturers. The stock of Merck has a year-to-date return of above 12%. In the previous round of 13F filings, almost 60 hedge funds from our database were bullish on Merck, so this is one particular stock to keep a close eye on.
During the first three months of 2013, Levin took a huge step in raising its equity portfolio value to almost $5.6 billion, from $5.0 billion at the end of December. This strategy appears to be paying off, so piggybackers should keep this fund on their watchlist (continue preparing for 13F-filing season here).