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Citadel L.L.C. is one of the world's largest hedge fund managers, with over $20 billion in equity investments. The firm manages the Kensington Global Strategies, Ltd., Pioneer Path, Ltd. and the Wellington Partners, L.P. The firm has offices in Chicago, San Francisco, New York and London.

Investment strategy: Citadel L.L.C. utilizes multiple investment strategies in making investments in the U.S., Europe and Japan. The firm's research efforts predominately rely on quantitative and fundamental analysis. The managers meet with corporate management and work with Wall Street analysts prior to making investments. Citadel uses leverage on various positions to maximize return.

The following is a list of its top seven buys in the last quarter, as released in its most recent 13F filing with the SEC.

Stock

Symbol

Shares Held 03/31/2011

Shares Held 06/30/2011

Change in Shares

eBay Inc.

(NASDAQ:EBAY)

60,321

5,927,289

5,906,968

Franklin Resources Inc.

(NYSE:BEN)

423,269

1,724,251

1,300,982

Colgate-Palmolive Co.

(NYSE:CL)

62,147

1,836,798

1,774,651

SM Energy Company

(NYSE:SM)

3,992

1,666,837

1,662,845

KeyCorp.

(NYSE:KEY)

7,123,867

20,914,337

13,790,470

Target Corp.

(NYSE:TGT)

443,699

2,587,643

2,143,944

Principal Financial Group

(NYSE:PFG)

57,628

3,033,470

2,975,842

My favorite buy among the above stocks is Colgate-Palmolive, due to its defensive product portfolio. Colgate has higher pricing power than its peers given its skew towards personal care and emerging markets, as well as low price points and private label penetration in its product categories. This limits consumer trade-down risk. Going forward, softnening spot commodity costs and a more rational pricing environment is likely to help company's margins. Incremental cost savings and Sanex accretion would be an added plus.

One stock in the above list for which I don't agree with Citadel, and beleive its is a sell instead, is KeyCorp. KeyCorp is the parent holding company for KeyBank National Association (KeyBank), its principal subsidiary, through which its banking services are provided. Through KeyBank and certain other subsidiaries, the company provides a range of retail and commercial banking, commercial leasing, investment management, consumer finance and investment banking products and services to individual, corporate and institutional clients through two business segments: Key Community Bank and Key Corporate Bank. KeyCorp's EPS forecast for the current year is $0.85 and next year is $0.78. According to consensus estimates, its top line is expected to decline 8.00% in the current year and grow 0.80% next year.

I am concerned about KeyCorp's prospects for core earnings growth, as its efficiency ratio remains elevated, loan balances continue to decline, and NIM is expected to remain under pressure. Although KeyCorp remains well-capitalized vs. peers, I am also concerned about capital deployment. I don’t see any share repurchases imminent, while there is a risk of an acquisition at an unattractive price. In addition, the macro environment has become incrementally worse off late. Thus, there is more downside risk for KeyCorp as compared to upside in the near term.

For other stocks in the above list, here are some of the specifics, including a brief description of their businesses and growth expectations (top line and bottom line):

eBay Inc. brings together buyers and sellers every day on a local, national and international basis through a range of websites. It provides online marketplaces for the sale of goods and services, as well as other online commerce and or e-commerce platforms and online payment solutions to a diverse community of individuals and businesses. It operates in two business segments: marketplaces and payments. ebay's EPS forecast for the current year is $2.00 and next year is $2.32. According to consensus estimates, its top line is expected to grow 25.70% in the current year and 17.40% next year.

Franklin Resources, Inc. is a holding company. Franklin, together with its various subsidiaries (collectively, the company), is referred to as Franklin Templeton Investments. It is a global investment management organization offering investment choices under the Franklin, Templeton, Mutual Series, Bissett, Fiduciary and Darby brand names. The company operates in two segments: investment management and related services, and banking/finance. Franklin's EPS forecast for the current year is $9.00 and next year is $9.70. According to consensus estimates, its top line is expected to grow 23.40% in the current year and 10.90% next year.

SM Energy Company is an independent energy company engaged in the acquisition, exploration, exploitation, development and production of natural gas and crude oil in North America, with a focus on oil- and liquids-rich resource plays. SM Energy's EPS forecast for the current year is $2.84 and next year is $4.95. According to consensus estimates, its top line is expected to grow 53.60% in the current year and 45.20% next year.

Target Corporation operates Target general merchandise stores with an assortment of general merchandise and food. Its expanded food assortment includes some perishables and some additional dry, dairy and frozen items. In addition, it operates Super Target stores with general merchandise items and a full line of food items.Target's EPS forecast for the current year is $4.22 and next year is $4.34. According to consensus estimates, its top line is expected to grow 3.80% in the current year and 4.10% next year.

Principal Financial Group, Inc. is a provider of retirement savings, investment and insurance products and services. Principal Financial's EPS forecast for the current year is $2.96 and next year is $3.36. According to consensus estimates, its top line is expected to grow 5.20% in the current year and 5.60% next year.

Source: Citadel's Top Increased Positions In Q2