Here's What This $65 Billion Hedge Fund Company Is Buying

Every quarter, many money managers have to disclose what they've bought and sold, via "13F" filings. Their latest moves can shine a bright light on smart stock picks.

Today, let's look at Citadel  Advisors, founded and run by Kenneth Griffin. It's one of the biggest hedge fund companies around, with a reportable stock portfolio totaling $65.5 billion in value as of Sept. 30, 2013.

According to the folks at InsiderMonkey.com, Griffin and his team use "a combination of advanced computer code, complicated financial algorithms and secrecy. Griffin was using quantitative, technology-based methods before many other firms had cell phones." The company took a big hit of more than 50% back in 2008, and with an impressive 20% gain in 2011, finally surpassed its 2008 high.

Interesting developments
So what does Citadel's latest quarterly 13F filing tell us? Here are a few interesting details:

The biggest new holdings are Elan and Dow Chemical. Other new holdings of interest include Halcon Resources (NYSE: HK  ) . Halcon Resources is down close to 40% over the past year, though its production has been growing. The company has been investing in greater efficiency and has successfully lowered some of its costs. Wells in the Williston Basin and Eagle Ford regions are quite promising. Halcon Resources has been growing rapidly -- in its last quarter, revenue surged 316% and production 237%. So what's the problem? Well, Halcon is not posting net profits, and it carries significant debt.

Among holdings in which Citadel Advisors increased its stake was Micron Technology (NASDAQ: MU  ) . Micron Technology shares have more than tripled over the past year, and are near a 52-week high. Micron's purchase of the Japanese company Elpida has been widely praised, as it has made it the world's second-largest DRAM maker. The new company has twice Micron's previous memory capacity, more pricing power, and a bigger relationship with Apple. Micron Technology recently announced a new, higher-performing processor architecture that's likely to compete with Intel, and its fourth quarter was solid, topping expectations. With Micron's forward P/E ratio near 10 , many still see great value in the stock, and some investing legends such as Seth Klarman and David Einhorn have been buying. Some would like to see its dividend of yore resurrected.

Citadel Advisors reduced its stake in lots of companies, including Broadcom (NASDAQ: BRCM  ) and Advanced Micro Devices (NYSE: AMD  ) . Communications chipmaker Broadcom has bulls optimistic about its presence in the new iPhones and in Nexus 5 devices. That bodes well for Broadcom's bottom line, and a recent acquisition might prove to be a game changer for it, too. Broadcom has been investing heavily in LTE technology, and some expect big LTE deals in the near future. Still, bears worry that Broadcom is having trouble growing its business. Broadcom stock yields 1.7%.

Advanced Micro Devices, or AMD, has been in penny-stock territory all year, perpetually battling giant Intel in an increasingly weak PC market. Short interest in the stock has grown lately, with bears not thrilled about its heavy free cash flow losses in recent years. Bulls, though, are hopeful about its recent cost-cutting and about its shift away from the PC market into more promising, growing areas such as gaming technology, where it's taking on NVIDIA in gaming chips. Some see a turnaround under way, but cautious investors want to see more results before jumping in.

Finally, Citadel's biggest closed positions included BMC Software and AutoZone. Other closed positions of interest include LINN Energy (NASDAQ: LINE  ) . LINN Energy offers a whopping 10.2% dividend yield and has a management team known for innovation. It specializes in buying mature, productive energy assets -- and is poised to eventually profit from the rich Bakken fields. The company's current quarter is going very well, and it has been making some savvy acquisitions. LINN does face an SEC investigation, though, and bears worry about dry wells, access to funding, and LINN overpaying for growth.

We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing. 13-F forms can be great places to find intriguing candidates for our portfolios.

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  • Report this Comment On December 08, 2013, at 11:42 AM, zorro6204 wrote:

    "LINN does face an SEC investigation . . . "

    No, it does not. The involvement of the SEC was limited to a private inquiry, it wasn't even required to be disclosed (LINE did so voluntarily). It appears to be over, though since it never rose to the level of an investigation, there may never be anything that says the inquiry is actually closed.

    Curious, you say good things about LINE, and that's okay, it remains cheap in the $30's. But you note Citadel closed its position, shouldn't the reasons behind that be the focus for speculation?

  • Report this Comment On December 08, 2013, at 1:59 PM, sklarb wrote:

    You mention LINN Energy as a closed position and state ”LINN does face an SEC investigation, though, and bears worry about dry wells, access to funding, and LINN overpaying for growth.”

    According to this Barron’s article from November 15, the Linn Energy/Berry Petroleum merger has been given the go-ahead by the SEC, and it wasn’t an investigation to begin with-rather an informal inquiry as disclosed by Linn Energy, which they were under no obligation to disclose- it was made public by the company, not the SEC:

    http://blogs.barrons.com/stockstowatchtoday/2013/11/15/linn-...

    From the article:

    “LINN Energy, LLC, LinnCo, LLC (LNCO) and Berry Petroleum Company (the “Companies”) announced today that the final Registration Statement on Form S-4 has been declared effective by the Securities and Exchange Commission (“SEC”), and the Companies have also filed definitive proxy materials with the SEC.”

    and:

    The independent ISS has recommended that shareholders vote for the merger:

    “ISS RECOMMENDATION

    Additionally, the Company announced today that Institutional Shareholder Services ("ISS"), a leading independent proxy voting and corporate governance advisory firm, recommends unitholders and shareholders vote "FOR" all proposals including the proposed merger with Berry (BRY) at the meetings of LINN Energy unitholders and LinnCo shareholders scheduled for Monday, December 16, 2013.”

    http://finance.yahoo.com/news/linn-energy-provides-updated-f...

    Try to get your facts straight before you write an article.

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