Here's What This Massive $27 Billion Hedge Fund Company Has Been Buying

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

Today let's look at Citadel, founded and run by Kenneth Griffin. It's one of the biggest hedge fund companies around, with a reportable stock portfolio totaling $27.1 billion in value as of June 30.

The company took a big hit of more than 50% back in 2008, and with an impressive 20% gain in 2011, it finally surpassed its 2008 high.

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

New holdings include quick-serve restaurant chain Buffalo Wild Wings. Despite a recent hiccup, it has been a great grower in recent years and still stands out above most peers. Its balance sheet is strong as well.

Among holdings in which Citadel increased its stake were domestic tobacco giant Altria (NYSE: MO  ) and Foster Wheeler (Nasdaq: FWLT  ) , which specializes in engineering, construction, and power-plant equipment. Attracting many investors to Altria is its 5.3% dividend yield, though some are steering clear because of the shrinking smoker base in the U.S. and increasing regulations and taxes, which can put pressure on profitability. If that's you, keep in mind that Altria also has a growing smokeless-tobacco business and a stake in beverage giant SAB Miller.

Foster Wheeler got a thumbs-up from respected research company Standpoint in June, partly on its expected 24% growth rate over the coming years. The company hasn't been enjoying the global economic slowdown, as orders have also slowed. Its last quarter revealed a drop in earnings, with management pointing to "higher sales pursuits costs -- mainly proposal costs -- as well as unfavorable utilization rates and other items." The CEO also added, "These results are certainly not indicative of a quarterly run rate, and we continue to expect that 2012 earnings per share will be materially higher than 2011." The company has also decreased its share count by 28% since 2008.

Citadel reduced its stake in lots of companies, including Chesapeake Energy (NYSE: CHK  ) , First Niagara Financial Group (Nasdaq: FNFG  ) , and Apple. Why would anyone cut back on Apple? Well, some fear a slowing growth rate for the company, or may simply want to take some profits. Plenty of folks remain quite bullish, partly on the strong reception of the iPhone 5 and also because of the company's huge legal win over Samsung that could kill off some patent-infringing competitors to iDevices.

Chesapeake Energy has had many at Fool HQ sighing deeply and shaking their heads over its abysmal leadership and governance practices. Its stock is down some 24% over the past year, leading some to wonder whether it's now attractive. Plenty of negatives remain, though, such as massive debt, which the company aims to pay down by selling off billions of dollars' worth of assets. Still, Chesapeake is a major natural gas company in an environment where low natural gas prices are leading it and others to shift their focus to oil.

Shares of First Niagara Financial touched 52-week-low levels a few months ago and have risen some since then, but the drop makes the shares more attractive to some investors. Well capitalized and sporting a 3.9% dividend yield, the regional bank is busy expanding in the Northeast, and fueling that with new share issuances, a sell-off of some mortgage-backed securities assets, and a dividend reduction. (The current yield reflects the reduction.) This positions it for future growth, based on its bigger branch base.

Finally, Citadel unloaded several companies, such as drilling-services giant Halliburton (NYSE: HAL  ) . The company has been hurt by a glut of natural gas leading to a cutback in drilling operations. Halliburton has already warned of a soft third quarter in North America as a result. On the other hand, though, the company's expertise in mature fields, unconventional markets, and deep drilling are pluses. And its revenue and earnings growth rates have been accelerating in recent years, with both firmly in double-digit territory. Some also expect rising guar prices to boost profit margins (guar is used in fracking) and like Halliburton's expansion of work in developing economies such as Brazil.

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, and 13-F forms can be great places to find intriguing candidates for our portfolios.

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Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, owns shares of Apple, but she holds no other position in any company mentioned. Check out her holdings and a short bio. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple, Buffalo Wild Wings, and Halliburton, as well as writing covered calls on Buffalo Wild Wings and creating a bull call spread position in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


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  • Report this Comment On September 26, 2012, at 9:26 AM, runningoutofcash wrote:

    Big_MO (Altria Group) : Great Investment.

    points:

    - 5% dividend

    - owns 50% of smokes market (Marlboro)

    - 25%+ stake in SABMiller

    - Wouldn't be suprised; if a Foreign-Entity takes a 10% stake for (7b ; 200mil shares).

    Heading above $40 ; by end-of-year.

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