In this installment of my analysis of recent purchases made by renowned investors, I will look at five tech stocks bought by Citadel Advisors LLC using the latest available SEC filings of the fund. For this article, I have selected stocks purchased by the fund during the 3rd quarter of last year that offer a minimum return of 20% from current levels.
Google was in news today with the Wall Street Journal reporting that the U.S. Department of Justice was poised to approve Google's acquisition of Motorola Mobility (MMI). GOOG plans to pay $12.5 billion ($40 a share) for MMI. GOOG is down 5.5% year to date compared with the 12% gain in the tech heavy NASDAQ (QQQ) index.
Citadel upped its position in GOOG by 106% by adding approximately 188,000 shares. The company is expected to grow its earnings at an annual rate of 19% on par with the projected 20% growth rate of the industry. Applying my estimated P/E of 21 to 2012 EPS estimate of $38.21, my initial price target of $800 a share is obtained. A return of 32% is possible from current levels.
Western Digital (WDC)
WDC is a $9.34 billion company by market cap and provides solutions for the collection, storage, management and protection of digital content. The stock is up 9% over the last year. Analysts still expect the company to grow at an annual rate of 12% over the long term compared with the 16% growth rate of the broader industry. WDC grew its earnings by 13% annually during the last 5 years.
Citadel practically initiated a position in WDC by purchasing 1.33 million shares, an increase of 4,249%. The stock traded in the range of $25 and $36 during Q3 2011 and currently trades at $40. Applying a P/E of 8.3 to my calendar year 2012 EPS estimate of $5.96, my price target of $50 is obtained. A return of 24% is possible from current levels.
Apple was Citadel's biggest investment during 2011 Q3. Citadel acquired 1.63 million shares of AAPL stock to take its total position to 2.43 million. My price target for AAPL is $677 a share. Trading at $479, AAPL is undervalued by over 45%. I have presented my analysis and fair value estimation in a recent article on AAPL and would encourage you to visit it for further details on the subject.
Oracle is locked in a battle with SAP over an intellectual-property theft case. On Thursday, Oracle rejected a $272 million award and opted to pursue a new trial against SAP. A jury had earlier awarded ORCL a payment of $1.3 billion, which the judge later overruled.
ORCL increased its earnings at an annual rate of 19% during the last 5 years and is now projected to grow at an annual rate of 12%. Citadel Advisories increased its position in ORCL by 1,672% by acquiring approximately 2.6 million shares.
My target of $37 is obtained by applying a P/E of 15 to my 2012 EPS estimate of $2.46. A return of 28% is possible from current levels.
SYMC is a $13 billion company by market cap and provides security, storage and systems management solutions to help customers manage their information and identities. The stock is down 2% over the last 5 years. During this time period, the company grew its earnings at an annual rate of 7%. Going forward, analysts expect a faster growth rate of 10% compared with the 20% growth rate of the broader industry.
Citadel added 2.28 million shares of SYMC stock, an increase of 1,056%. The stock primarily traded in the range of $16 and $19 during Q3 2011 and currently trades at $17.75. Applying a P/E of 14 to 2013 EPS estimate of $1.76 (FY ending March 2013), my price target of $25 is obtained. A return of 41% is possible from current levels.
As always, please do not consider this a "buy" list, rather use it as a starting point for your research. Of the companies listed above, I find AAPL particularly attractive based on fundamentals and growth prospects.