Norwegian hedge fund manager Ole Andreas Halvorsen is one of the world's most highly regarded investors. He's also worth following because he tends to run a relatively concentrated portfolio -- slightly more than 50% of Viking Global Investors holdings are in the top 10 stocks -- so his stock picks are highly relevant. With this in mind, let's take a look at three stocks Viking added in the last quarter.

A businessman holding a Viking axe and shield and some money

Image source: Getty Images.

Invest like a Viking

Halvorsen is clearly someone who backs the conviction of his approach, because the three stocks bought in the period in question spent much of it underperforming the S&P 500 index. In other words, it appears that Viking responded to the declines by buying the stocks because their long-term fundamentals remain sound despite market jitters.

FTV Chart

FTV data by YCharts.

Here are the three stocks in relation to the Viking portfolio.


Percentage of Viking Holdings

Current Value

Increase in Shares Held (AMZN -0.91%)


$1,601 million


Lowe's Companies (LOW -0.82%)


$558 million


Fortive (FTV 0.85%)


$344 million

New position

Data source: Viking Global Investors 13F SEC filing.

Amazon remains an enigma

Superficially speaking, no one is going to get excited about buying a stock that trades at 44 times its current free cash flow (FCF) and 65 times analyst consensus earnings for 2020. That said, the case for buying stock in Amazon has always been about the idea that it was a high-growth business on its way to penetrating and dominating new markets and that margin, earnings, and cash flow would inevitably follow.

It's a compelling case. After all, the company has grown revenue at an annual rate of 28% a year over the last decade, and analysts have 19% penciled in for the next few years. Moreover, the bullish case for the stock argues that Amazon is now significantly improving its FCF generation.

Amazon share of revenue

Data source: Amazon presentations.

Indeed, Amazon's improving FCF generation is featured on the first slides of the last earnings call, and it's something the company is keen to promote.

However, before you rush to hit the buy button, consider that Amazon's recent growth has been about Amazon Web Services, and it remains the biggest earnings generator at Amazon.

Amazon operating income

Data source: Amazon presentations.

While this is not a concern itself -- Amazon is investing in growth in e-commerce right now -- it does mean that the investment decision around the company still centers on a belief that Amazon can significantly expand margin and profits over the long term from its North America e-commerce operations. In other words, despite how good the FCF trend looks at the moment, it's not definitive evidence that Amazon is on track to justify its valuation.

In this regard, one key number to look out for is something called incremental operating margin, a measure of the increase in profit divided by the increase in revenue. For example, if a company increases revenue by, say $100 million and profits by $10 million, its incremental operating margin is $10 million/$100 million or 10% -- a higher number is better.

It's a useful measure to see how much of the increase in revenue is being converted into profit.

Incremental Operating Margin



First Nine Months 2019

North America








Amazon Web Services




Data source: Amazon presentations.

To be fair, Amazon's North America incremental operating margin has fallen in 2019 largely because of a 21.4% increase in expenses to support future growth, and there's nothing wrong in that.

However, the point remains that if you follow Halvorsen into the stock, you are buying in the belief that Amazon will start to see a significant pickup in incremental operating margin in North America. It's not simply a case of projecting out the FCF that the company is generating and highlighting right now.

The good news is that Amazon's growth is so strong that its incremental operating margin should improve in 2020 -- something to look out for before you buy this tech stock.

Lowe's Companies

While the key number to look for at Amazon proved to be behind the headlines, the key to the investment case for Lowe's stock is staring you in the face. It's margin.

Simply put, if Lowe's CEO, Marvin Ellison, can bridge the gap between Lowe's and his former company, The Home Depot (HD -0.36%), margins and then earnings could improve dramatically, and the price that the market is willing to pay for Lowe's earnings could improve too.

LOW Gross Profit Margin (TTM) Chart

LOW Gross Profit Margin (TTM) data by YCharts.

On that note, Halvorsen's investment in Lowe's appears to have received some positive news, with the company reporting an increase in adjusted gross margin to 32.44% in the third quarter from 30.91% in the same period last year. Meanwhile, adjusted operating margin improved to 9.26% compared to 7.11%, and Ellison declared Lowe's would take the axe to 34 underperforming stores in Canada, with further restructuring actions to follow.

All told, Lowe's appears to be making progress on its plans, and the stock is an interesting and attractive turnaround story.

A bull in front of a rising stock chart.

Image source: Getty Images.


It hasn't been an easy year for Fortive or for any other company with heavy exposure to so-called short-cycle spending -- meaning a short lead time between initial contact and sales -- in the industrial sector. Indeed, Fortive saw continued slowing in short-cycle sales in its professional instrumentation segment (test, measurement, and monitoring equipment), leading management to cut earnings expectations through 2019.

In addition, the challenging end-market conditions "aren't probably likely to change all that much" in the near-term, and are probably going to be the same in the first quarter and to the end of the second quarter, according to CEO Jim Lico on the recent earnings call.

No matter. It appears that Halvorsen has taken the long-term view and decided to buy into the business in anticipation of a return to growth. Given the upside surprise in the recent earnings and guidance of companies with industrial spending exposure, such as Rockwell, Siemens, and Parker-Hannifin,  there's enough to suggest he's right. 

For investors willing to bet on a recovery in industrial spending at some point in 2020, Fortive is an interesting option.