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By Guan Wang

Tiger cub Andreas Halvorsen launched Viking Global in 1999 and he has remained a fund manager to watch. From June 2005 to March 2010, Viking Global returned a whopping 119%, compared to just 11% for the MSCI World Index. In mid-January, we wrote an article about the performance of Andreas Halvorsen's top 10 positions as of September 30, 2011. These 10 positions beat the market by 13 percentage points in three-and-a-half months. We thought Halvorsen had an edge over ordinary investors and we recommended investors focus on his top stock picks.

Recently, we decided to check back on Halvorsen's performance. Overall, the top 10 positions in Halvorsen's portfolio generated an average return of 25% since the beginning of 2012, versus 12% for the S&P 500 index. Halvorsen's top 10 positions beat the market by 13 percentage points again in less than three months.

Over the fourth quarter last year, Halvorsen adjusted the largest positions in his portfolio. He sold out of his position in Time Warner Cable Inc (TWC), which was the fourth largest position at the end of the third quarter. The stock has returned 27% so far this year - a sizable return that Halvorsen missed out on by selling too early. Halvorsen also largely increased his position in Qualcomm (QCOM), Mastercard (MA) and Capital One Financial (COF). These three stocks were not among the top 10 positions at the end of September, but they were at the end of December. These three stocks have outperformed the market significantly so far this year.

Top 10 positions in Halvorsen's 13F portfolio as of December 31, 2011:

Company Name

Ticker

value

Activity

YTD Return

U S BANCORP DEL

USB

584112

-12%

16.64%

INVESCO LTD

IVZ

528221

-20%

30.72%

APPLE INC

AAPL

524029

14%

50.58%

BAIDU INC

BIDU

506749

48%

25.71%

QUALCOMM INC

QCOM

464200

208%

24.62%

MASTERCARD INC

MA

426319

50%

14.91%

LYONDELLBASELL INDUSTRIES N V

LYB

399193

-5%

33.57%

BLOCK H & R INC

HRB

386304

-1%

3.60%

CAPITAL ONE FINANCIAL CORP

COF

327986

144%

33.56%

VALEANT PHARMACEUTICALS INTL INC

VRX

312403

-22%

15.42%

The best performing stock in the Viking Global portfolio is Apple, which returned over 50% since the beginning of this year. There were 127 hedge funds with Apple positions in their portfolios at the end of last year. Besides Halvorsen, several other Tiger Cubs were bullish about Apple. For example, Stephen Mandel's Lone Pine Capital had nearly $900 million invested in Apple. Chase Coleman's Tiger Global Management LLC also invested $656 million in Apple at the end of 2011.

We have been recommending Apple to our readers. The stock has attractive valuation levels - its P/E ratio is about 17 and its forward P/E ratio is about 13. More importantly, the company has very strong growth potential. Over the past five years, Apple's EPS grew at an average of over 60% per year. In the next couple of years, its earnings are still expected to grow at 20% annually.

Halvorsen also made a bundle from his investments in Baidu Inc, a position he increased by 48% over the fourth quarter. Halvorsen had $505 million invested in the Chinese company at the end of the December. The stock is up about 26% so far this year, driven largely by the growing Chinese Internet search market. Its share price swelled over 60% last year. Baidu has a leading position in this market with a market share of about 78%. The major competitor Google (GOOG) announced in early 2010 that it was considering discontinuing its services in China due to censorship and issues regarding cyber-attacks.

Later in the same year, Google discontinued Google.cn service in mainland China. Clearly, Baidu benefited from the uncertainties of Google's Chinese business and gained market share. We are optimistic about Baidu's future. As the leading Chinese language Internet search company, Baidu is expected to take advantage of the fast growth of the Chinese Internet search market and continue to experience strong revenue and earnings growth. Tiger Cubs Stephen Mandel and Chase Coleman were bullish about Baidu too. Both their funds had nearly $300 million invested in this company at the end of 2011.

The only stock listed above that underperformed the market is H&R Block. It has returned 3.6% since the beginning of this year, versus 12% for SPY. Despite that, we still think H&R Block is worth buying. The company seems to be trading at a discount. Its current P/E ratio is 12.56, versus an average of 18.44 for its industry. Analysts expect it to make $1.38 per share in 2012 and $1.64 per share in 2013.

The company seems to have stable earnings growth. Over the longer term, its earnings are expected to grow at about 11% per year, which is a pretty strong growth rate. Although the overall economy is still a bit soft, we think H&R Block will be less affected compared with other companies as it has been actively acquiring new customers through advertising. The company also has an attractive dividend yield of 4.79%, versus 2% for the 10-year Treasury bond. Its payout ratio of 61% also indicates that it is able to maintain or even further increase its dividend payouts in the future. Charles Clough, Leon Cooperman, Cliff Asness and Ray Dalio all initiated new positions in H&R Block during the fourth quarter last year.

Overall we like Halvorsen's stock picks. As one of the most successful Tiger Cubs, Halvorsen helped his Viking Global Investors return a stunning 89% after fees in the first year of establishment. His recent performance was still strong. He made about 8% over the past year and we believe he will continue the good performance in the year ahead.

Source: Andreas Halvorsen's Picks Up 25% So Far This Year