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“Good Business, Good Management, and Good Price” is what 3G (literally) stands for. "We look for well-managed businesses that are competitively entrenched, generate high returns on invested capital and carry little debt. Equally important, we are seeking to purchase these businesses at a significant discount to their intrinsic value," Pavel Begun, the co-founder of the company, explained.

Growing up up in Minsk, Begun dreamed of being a capitalist entrepreneur when he was a child. He moved to the United States in 1998 and received an MBA from University of Chicago. He started his career as a research analyst at Fiduciary Asset Management. Later in July 2004, he co-founded 3G Capital Management with Cory Bailey. 3G Capital is well-known for their bold bets in Brazil. They are also well-known because Chelsea Clinton’s husband worked there.

Here are the top positions of 3G Capital Management as of September 30, 2011.

CompanyName

Ticker

Value

Activity

ISHARES INC (Calls)

[[EWZ

64180

New

UNION PACIFIC CORP

[[UNP

52086

1860%

GOLDMAN SACHS (Calls)

[[GS

47275

New

CBS CORP NEW

[[CBS

38030

New

GOLDMAN SACHS

[[GS

35511

19%

TIME WARNER CABLE INC

[[TWC

35252

New

SIRIUS XM RADIO INC

[[SIRI

34078

102%

TYCO INTERNATIONAL

[[TYC

23033

-20%

VERISIGN INC

[[VRSN

19949

New

VIACOM INC NEW

[[VIA-B

12037

New

KKR & CO LP

[[KKR

10400

New

CVR ENERGY

[[CVI

7087

New

BANCO BRADESCO SA

[[BBD

6360

New

PHILLIPS VAN HEUSEN

[[PVH

5924

New

WARNACO GROUP INC

[[WRC

5803

New

SOTHEBYS

[[BID

5439

New

VALE S A

[[VALE

4075

-48%

DARDEN RESTAURANTS INC

[[DRI

 

Sold Out

DIRECTV

[[DTV

 

Sold Out

ITAU UNIBANCO HLDNG

[[ITUB

 

Sold Out

PETROBRAS

[[PBR

 

Sold Out

AMDOCS LTD

[[DOX

 

Sold Out

According to 3G Capital’s latest 13F, the company increased its portfolio value from $165 million at the end of June to $407 million at the end of September. 3G only invested in 10 positions at the end of the second quarter, and now it has 17 positions.

The fund bought many new stakes and it also sold out a few positions. For instance, 3G sold out its stakes in Itau Unibanco Holdings (NYSE:ITUB). 3G had $30.3 million invested in this stock at the end of June. The stock returned 6.83% since the end of September, while SPY returned 5.75% in the same period. 3G also sold out $8.5 million worth of Amdocs Ltd (NASDAQ:DOX), which returned 4.54% since September 30. Additionally, 3G sold out Directv (NASDAQ:DTV), Darden Restaurants Inc (NYSE:DRI) and Petroleo Brasileiro Sa Petrobras (NYSE:PBR).

During the third quarter, 3G Capital largely increased its stakes in Union Pacific Corp (NYSE:UNP). It increased its position in the stock by 1860% to $52.1 million. UNP returned 20.50% so far since the end of September, beating the market by almost 15 percentage points. 3G also significantly increased its position in Sirius X M Radio Inc (NASDAQ:SIRI). The fund doubled its holding in XIRI to $34.1 million. SIRI returned 22.52% since the end of the third quarter, also outperforming the SPY by nearly 17%.

As we mentioned, 3G Capital bought many new positions over the third quarter. The biggest new position is iShares MSCI Brazil Index Call (NYSEARCA:EWZ). 3G initiated $64.2 million worth of EWZ call options. EWZ returned 11.09% since the end of September, which means 3G made about 10% from this new position. 3G also bought Goldman Sachs (NYSE:GS) call options and increased its stakes in GS stocks by 19%. But GS lost 3.44% since the end of the third quarter. Boykin Curry is extremely bullish about Goldman Sachs predicting a 50% return over the next couple of years.

3G Capital is also bullish about CBS Corp (NYSE:CBS). The fund initiated a brand new $38 million CBS stock in the third quarter. CBS returned 18.20% since September 30, beating the market by over 12 percentage points. 3G Capital also opened new positions in Time Warner Cable Inc (NYSE:TWC), Verisign Inc (NASDAQ:VRSN), Viacom Inc (VIA-B), and KKR & Co (NYSE:KKR). CBS is starting to become very popular among hedge funds. David Einhorn also placed large bets on CBS during the third quarter.

3G Capital’s turnover is pretty high. With less than 20 positions in total, the fund sold out five positions and bought 12 new positions over the third quarter. Most of its large positions generated better-than-market return since the end of September. 3G Capital is also a well-connected hedge fund. We believe that by focusing on 3G Capital’s best stock picks, investors will be able to beat the market in the long term.

Source: 3G Capital's Top Stock Picks