New York-based Goldman Sachs Group Inc. (GS) via its Asset Management division manages over $700 billion in assets under management, including over $198 billion in 13-F assets per its latest Q4 filing with the SEC. As one of the world's top ten asset managers, it offers a broad range of investment products, primarily through separately managed accounts and comingled vehicles, across all major asset classes to a diverse of institutions and high net worth individuals worldwide. The fund is well diversified with over 3,800 positions in its portfolio, and the top ten positions together account for about 17% of its portfolio assets. Also, about 70% of its 13-F assets are in large-caps, another 20% is in mid-caps, and small-cap equities account for the remaining ten percent.
We analyzed Goldman's equity holdings in its Q4 13-F to determine its highest conviction bets (see Table), selecting the largest buys and sells in size, where the buy/sell is also a significant proportion of its prior quarter position in that company. Based on that analysis, the following are its high conviction bullish bets in Q4 (see Table):
UnitedHealth Group Inc. (UNH): UnitedHealth is a diversified health and well-being company, serving more than 70 million Americans. Goldman added $173 million in Q4 to its $179 million prior quarter position. Other major institutional investors with large bullish bets on UNH in Q4 include JPMorgan Chase adding 4.0 million shares to its 18.7 million share prior quarter position, and Oppenheimer Funds adding 1.6 million shares to its 0.2 million share prior quarter position. UNH stock currently trades at a 10-11 forward P/E and 2.0 P/B compared to averages of 10.5 and 2.0 for its peers in the HMO group. The company is an outperformer in the group, posting a good Q4 in January that handily beat analyst earnings estimates ($1.17 v/s $1.04) and reaffirmed forward guidance, and its shares currently trade near four-year highs.
Juniper Networks Inc. (JNPR): JNPR provides secure network infrastructure products and services that enable ISPs and telecommunications service providers to deploy services and applications and meet the demands resulting from the rapid growth of the Internet. Goldman added $124 million to its $180 million prior quarter position. Other major institutional investors with large bullish bets on JNPR in Q4 include Atlanta-based investment powerhouse INVESCO adding 3.4 million shares to its 2.0 million share prior quarter position, and Morgan Stanley adding 2.1 million shares to its 2.0 million share prior quarter position. JNPR shares currently trade at the low end of its recent trading range, at 17-18 forward P/E and 1.6 P/B compared to averages of 39.1 and 3.3 for its peers in the wireless equipment group.
Vale SA (VALE): Rio De Janeiro, Brazil-based VALE is one of the world's leading mining companies, and specializes in the mining of iron ore and pellets, manganese, alloys, gold, copper, potassium, and kaolin. Goldman added $284 million in Q4 to its $367 million prior quarter position. Other major institutional investors with large bullish bets on VALE in Q4 include Edinburgh-based esteemed investment management firm Baillie Gifford & Co. adding 4.2 million shares to its 20.3 million share prior quarter position, and mutual fund guru RS Investment Management adding 1.5 million shares to its 1.9 million share prior quarter position. VALE is undervalued, trading at 6.0 P/E and 1.5 P/B compared to averages of 20.9 and 2.2 for its peers in the miscellaneous mining group, while earnings are projected to fall from $4.23 in 2011 to $3.82 in 2013.
Other high conviction buys by Goldman in Q4 include (see Table):
- Vertex Pharmaceuticals (VRTX), engaged in the discovery, development and commercialization of small molecule drugs for the treatment of hepatitis C, cystic fibrosis, epilepsy and other life-threatening diseases, in which it added $153 million to its $8 million prior quarter position;
- Petroleo Brasileiro SA (PBR), a Brazilian company engaged in the exploration, production, supply and distribution of oil and gas in Brazil and abroad, in which it added $131 million to its $308 million prior quarter position; and
- Sao Paulo, Brazil-based Itau Unibanco Holding SA (ITUB), that provides various commercial, corporate, and investment banking services to individuals, and small and middle-market companies in Brail and internationally via over 4,900 full service branches and customer service outlets worldwide, in which it added $110 million to its $138 million prior quarter position.
The following are Goldman's high conviction bearish picks based on their Q4 selling activity (see Table):
- Wellpoint Inc. (WLP), a provider of managed healthcare services through PPO, HMO and POS, indemnity and other hybrid plans to 33.3 million members, in which it cut $291 million from its $380 million prior quarter position;
- packaged food manufacturer Conagra Foods Inc. (CAG), in which it cut $243 million from its $291 million prior quarter position;
- Teva Pharmaceutical (TEVA), an Israeli developer of generic and branded drugs and active pharmaceutical ingredients, in which it cut $204 million from its $532 million prior quarter position;
- Potash Corporation of Saskatchewan, Inc. (POT), the world's largest integrated fertilizer and related industrial and feed products company by capacity, in which it cut $120 million from its $250 million prior quarter position;
- Barrick Gold Corporation (ABX), a Canadian company engaged in production of gold and copper in Peru, Canada, U.S., Australia, Chile, and five other countries,, in which it cut $112 million from its $354 million prior quarter position; and
- Valero Energy Corp. (VLO), an independent petroleum refining and marketing company operating through three segments, namely, refining, retail and ethanol, in which it cut $98 million from its $311 million prior quarter position.
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Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
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