Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



3 Stocks This $72 Billion Hedge Fund Recently Bought

Chicago-based Citadel Advisors is one of the largest and most successful hedge funds in the world. Money managers like Citadel must reveal their stock maneuvers every quarter in SEC 13F filings. Here are three of Citadel's recent stock purchases.

Bristol-Myers Squibb (NYSE: BMY  ) grabbed Citadel Advisors' attention this quarter, boosting its total stake to nearly $15 million. The New York-based pharmaceutical company is in the midst of a drawn-out patent cliff. Over the next several years, Bristol will lose patent protection on drugs that currently generate a significant amount of sales. Yet Bristol boasts a strong drug pipeline, particularly in cancer research. The company has invested heavily in nivolumab, a promising drug that will likely deliver an improvement in the way the disease is treated. However, with other drug companies like Merck and Roche also making strides in that area, investors may have become overly optimistic about the revenue Bristol's new compound might generate.

Enthusiasm is reflected in Bristol's valuation: The drugmaker's price-to-earnings ratio of roughly 28 times is a premium to its industry average of less than 25. But so far, that hasn't stopped Citadel from buying Bristol-Myers Squibb's stock.

Citadel owns a nearly $25 million stake in The Coca-Cola Company (NYSE: KO  ) with over 637,000 shares. Coke's ability to develop new products and reinvent old ones generates stable profits for the company and its shareholders. One of the world's most far-reaching distribution systems serves Coke's mammoth beverage portfolio, including its 17 billion-dollar brands. The cola giant's production techniques are well developed, resulting in high profit margins. Although U.S. soda consumption is declining and Coke has struggled with sluggish soda sales, the company is actively reinventing itself. To jolt sales of its entire product line-up, Coke is exploring alternatives. For example, Coca-Cola and Keurig Green Mountain signed an agreement to develop and roll out Coke's global portfolio of products for use in Green Mountain's upcoming Keurig Cold at-home beverage system. It's unclear whether these machines will boost at-home consumption of Coke products, but the company feels this is an opportunity to grow overall sales. Apparently, Citadel Advisors agrees.

The hedge fund also owns a $31.6 million position in Pfizer (NYSE: PFE  ) . The drug maker has become a huge organization after acquiring many companies over the past several years. These acquisitions benefited Pfizer, but some came with divisions that were unrelated to its core pharmaceutical business. As a result, Pfizer has refocused on its core business by selling or spinning off some non-pharma divisions such as Nutrition and Animal Health. For example, last year the drug maker launched an IPO of a minority stake in Zoetis, once Pfizer's animal health business. Many investors, likely Citadel Advisors included, believe this strategy will allow Pfizer's robust drug pipeline to have a greater impact on company growth and profitability. Despite Lipitor's recent patent expiration, Pfizer boasts a healthy drug pipeline, including therapies for rheumatoid arthritis, stroke prevention, and cancer.

Bristol-Myers Squibb, Coca-Cola, and Pfizer possess forward price-to-earnings ratios of 29, 18, and 13, respectively. By comparison, the P/E ratio of the S&P 500 is currently 18, signaling Coca-Cola may be fairly valued and Pfizer may be undervalued. The Motley Fool CAPS community rates Bristol-Myers Squibb, Coca-Cola, and Pfizer all 4-star (out of 5) stocks. 

Foolish takeaway
Citadel Advisors is feeling bullish on these three companies right now. But don't blindly follow this hedge fund's moves into these stocks with positions of your own. Conduct your own research and formulate your thesis. You'll be a better investor for it.

Invest in the next wave of health care innovation
The Economist compares this disruptive invention to the steam engine and the printing press. Business Insider says it's "the next trillion dollar industry." And the technology behind is poised to set off one of the most remarkable health care revolutions in decades. The Motley Fool's exclusive research presentation dives into this technology's true potential, and its ability to make life-changing medical solutions never thought possible. To learn how you can invest in this unbelievable new technology, click here now to see our free report.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2967008, ~/Articles/ArticleHandler.aspx, 8/31/2015 9:37:27 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Nicole Seghetti

Nicole is a contributing writer for The Motley Fool. She's worked as a financial advisor and planner for over a decade. Nicole holds an MBA from the University of the Pacific and a chemical engineering degree from Purdue University. She welcomes you to follow her on Twitter.

Today's Market

updated 2 days ago Sponsored by:
DOW 16,643.01 -11.76 0.00%
S&P 500 1,988.87 1.21 0.00%
NASD 4,828.33 15.62 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:03 PM
BMY $60.61 Down +0.00 +0.00%
Bristol-Myers Squi… CAPS Rating: ****
KO $39.45 Up +0.18 +0.00%
Coca-Cola CAPS Rating: ****
PFE $32.66 Down -0.60 +0.00%
Pfizer CAPS Rating: ****
GMCR $54.11 Down +0.00 +0.00%
Keurig Green Mount… CAPS Rating: **
MRK $55.37 Up +0.42 +0.00%
Merck & Co., Inc. CAPS Rating: ****
RHHBY $34.16 Down -0.69 +0.00%
Roche Holding Ltd.… CAPS Rating: *****
ZTS $45.78 Down +0.00 +0.00%
Zoetis CAPS Rating: *****