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New York-basedHedge FundBlue Ridge Capital Holdings LLC, headed by guru, Tiger Cub and Star Manager John Griffin, manages $5.8 billion and invests in public equity markets across the globe. Griffin, like guru Stephen Mandel at Lone Pine Capital LLC and guru Lee Ainslie at Maverick Capital is a Tiger Cub, meaning that he honed his investment skills while working for legendary hedge fund manager Julian Robertson at Tiger Management LLC. In fact, he is widely believed to have been Mr. Robertson's right-hand man. In 1996, like many other Tiger Cubs that started their own hedge funds, he left Tiger Management to start Blue Ridge Capital. Mr. Griffin received his undergrad degree from the University of Virginia and an MBA from Stanford Graduate School of Business. Besides managing Blue Ridge Capital, he also currently serves as an adjunct professor at Columbia Business School.

Blue Ridge Capital targets absolute returns by going long/short equity with a long bias. They employ fundamental analysis and seek to invest in companies that dominate their industries and short the companies that have fundamental problems. Mr. Griffin is believed to be one of the highest compensated hedge fund managers and it is reported that after a banner 65% return in 2007, he made $625 million that year.

The fund holds a concentrated portfolio of 60 positions and almost two-thirds of their holdings are in large-caps, another quarter are in mid-caps and small-caps account for the remaining five to 10 percent of their holdings. Their portfolio turnover is around 50% implying an average holding period of two years. Based on the most recent SEC 13-F filing for the March 2011 quarter, we determined that their portfolio is over-weight in the Services, Financials, Healthcare and Utility Sectors and it is under-weight the Consumer, Energy and Transportation Sectors.

The following summarizes their new picks and pans in the latest reported 13-F filing for the March 2011 quarter and updated based on 13-G filings since the end of the quarter:

  • Level 3 Communications (NYSE:LVLT) provides network access services to telecom service providers, businesses , and distribution providers. Since the end of the March 2011 quarter, Blue Ridge filed a SEC form 13G on May 23rd indicating that their ownership of the company exceeds 5%. Specifically, they added $132 million to their $12 million position since the end of the December 2010 quarter, including $117 million since the end of the March 2011 quarter. This is a high conviction buy as their ownership exceeds 5% and they added significantly to their prior position after LVLT has gone up almost three-fold in the prior six months, indicating a high confidence in their buy.
  • Express Scripts Inc. (NASDAQ:ESRX) provides pharmacy benefit management services to managed care organizations, employers, insurers and administrators. The position was initiated in mid-2009 probably in the low-$30s and the stock recently traded above $60, so the selling could just be normal profit-taking.
  • BP plc ADR (NYSE:BP) is a British company engaged in the exploration, production, refining, marketing and transportation of oil and gas globally. The position was initiated in mid-2009, and the stock has been volatile since then after the BP spill in the Gulf of Mexico in May 2010. The sell-out of their entire position after this period of volatility just as BP has recovered half of the ground it lost after the spill does not appear to be a conviction sell.
  • Western Union Co. (NYSE:WU) provides money transfer and payment transactions via 410,000 agent locations in more than 200 countries and territories. This is a conviction sell as the position was initiated in the quarter ending September 2010 just six months ago, and they sold out completely what was among their larger positions well before their typically holding period of two years.
  • Baker Hughes Inc. (NYSE:BHI) provides well-bore products and technology services and systems to the global oil and natural gas industry. This is a conviction buy as Blue Ridge initiated a large new position of $185 million in the company during the quarter.
  • CIT Group Inc. (NYSE:CIT) is a global provider of commercial and consumer financing and leasing capital to small, mid-size and larger companies. The position was initiated in early 2010 and their selling out of the entire position at prices not too far above their buy price and well before their average holding period of two years makes this a conviction move.
  • Crown Castle International Corp. (NYSE:CCI) operates wireless towers in the U.S., Australia, and Puerto Rico for wireless service providers. They initiated this position in late 2008, probably in the mid-teens so the selling of a portion of their holdings with the price in the $40s is just normal profit-taking and not a conviction sell.
  • eBay Inc. (NASDAQ:EBAY) provides online marketplaces and electronic payment services via eBay, PayPal.com, and other websites. This is a new buy during the quarter of $137 million and among their larger holdings, and hence represents a conviction move by them.
  • Range Resources Corp. (NYSE:RRC) is engaged in the exploration and production of oil and natural gas in the south-western and Appalachian regions of the U.S. They initiated the position in early 2009, so adding another $108 million to their already significant position is a conviction move by them.
  • Sensata Technologies Holding NV (NYSE:ST) manufactures customized sensors and controls for current and heat protection in aircraft, cars, and electric motors. This is a new buy for them of $105 million during the quarter after the stock has already made a double in the last nine months, and represents a conviction buy.
  • Valeant Pharmaceuticals (NYSE:VRX) develops primarily branded drugs to treat central nervous system disorders, pain and cardiovascular disease. They initiated this position at much lower levels in mid-2010 probably in the high teens or low-$20s. Since then, the Company has acquired Biovail and is currently engaged in an acquisition bid for Cephalon Inc. (NASDAQ:CEPH). Blue Ridge buying additional shares to what is already their largest position and after such a huge up-move indicates their high degree of conviction in this buy.
  • Amazon.com Inc. (NASDAQ:AMZN) provides online retail services, which enable merchandise and content to be sold via Amazon.com and other websites. This position was initiated in early 2002 probably in the teens, and the stock is up more than 15-fold since then, so selling off a portion of what is their second largest holding is not a conviction sell.
  • Apple Inc. (NASDAQ:AAPL) manufactures personal computers, mobile communication devices, and portable digital music players. This too is not a conviction move; the position was initiated in early 2008 at probably in the $130s and the selling off a portion after the price has appreciated to the $330s is not a conviction sell.
  • Netflix Inc. (NASDAQ:NFLX) provides online movie rental subscription services to 20 million subscribers via Netflix.com. This is a high conviction move as they added $70 million to a position they initiated back in mid-2007 when NFLX traded in the $20s.

Table

Company

Ticker

New or Increased or Decreased or Unchanged Position

Market Value at end of March 2011 Quarter

Change in Value from Prior Quarter

New 13G 5% Ownership Filing Since End of March 2011 Quarter

Level 3 Communications

LVLT

Added

$ 144 million

$ 132 million

New Picks and Pans

Express Scripts Inc.

ESRX

Decreased

$ 0 million

$ 282 million

BP Plc ADR

BP

Decreased

$ 0 million

$ 222 million

Western Union Co.

WU

Decreased

$ 0 million

$ 210 million

Baker Hughes Inc.

BHI

New Position

$ 185 million

$ 185 million

CIT Group Inc.

CIT

Decreased

$ 0 million

$ 164 million

Crown Castle International Corp.

CCI

Decreased

$ 66 million

$ 137 million

eBay Inc.

EBAY

New Position

$ 137 million

$ 137 million

Range Resources Corp.

RRC

Added

$ 335 million

$ 108 million

Sensata Technologies Holding BV A

ST

New Position

$ 105 million

$ 105 million

Largest Holdings

Valeant Pharmaceuticals International

VRX

Added

$ 444.58 million

$ 10.96 million

Amazon.com Inc.

AMZN

Decreased

$ 351.79 million

$ 30.62 million

Apple Inc.

AAPL

Decreased

$ 340.53 million

$ 52.62 million

Netflix Inc.

NFLX

Added

$ 238.97 million

$ 70.15 million

Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, I-Metrix by Edgar Online, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.

Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are my opinions and I may be wrong. I may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to my thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.

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

Source: Analysis of Top New Conviction Buys and Sells by Tiger Cub and Guru John Griffin