Billionaire Hedgie Richard Chilton Five Largest Holdings.
by Matt Doiron to Insider Monkey
Richard Chilton founded Chilton Investment Company in 1992 and has since become a billionaire as the fund’s fundamental value-oriented investment strategy has produced good returns. The fund recently filed its 13F for the third quarter of 2012; this filing discusses many of Chilton’s long equity positions. We thought it might be interesting to look at some of the low-multiple stocks in the fund’s portfolio and see if they are worthy of further research. Here is our quick take on Chilton’s five largest holdings by market value in stocks with trailing and forward P/E multiples of 12 or lower:
Agrium Inc. (NYSE:AGU) was one of Chilton’s five largest holdings with the fund owning about 890,000 shares, and trades at 12 times trailing earnings. Agrium is a wholesaler and retailer of fertilizers and other agricultural products, and JANA Partners (a value hedge fund managed by Barry Rosenstein) has been buying up shares in the company and encouraging management to split the business in two to create more shareholder value. Find out more about JANA and Agrium. Net income was down 57% in the third quarter compared to the same period in 2011, but the stock is up strongly as the market expects higher demand for agriculture products as the demand for food increases.
Chilton also liked Corning Incorporated (NYSE:GLW), reporting a position of 6.8 million shares. Corning provides products including specialized glass displays and optical fiber, and has a market capitalization of $18 billion. This places its valuation at 10 times trailing earnings. Its business has also been performing poorly recently- last quarter its earnings were down 36% versus a year earlier- but Wall Street analysts expect the company to rebound and get steady growth over the next several years. The forward P/E multiple is 9, and the five-year PEG is 0.8. As a result we think that the company is well worth considering on a value basis.
The fund owned about 680,000 shares of oil major Chevron Corporation (NYSE:CVX). Oil majors are generally trading at low prices, and Chevron is no exception at 9 times earnings (whether we consider trailing earnings or analyst consensus for 2013). Chevron also pays a 3.4% dividend yield at current prices and dividend levels. However, the oil majors are cheap in part because they have been struggling in recent quarters and the company is no exception here as well. Fellow billionaire Stanley Druckenmiller’s Duquesne Capital initiated a position of about 760,000 shares during the third quarter (check out Druckenmiller’s favorite stocks). We’re interested in Chevron, but we might prefer investing in Exxon Mobil or BP.
Oil and gas equipment and services company National-Oilwell Varco, Inc. (NYSE:NOV) was another cheap Chilton pick as the fund bought nearly all of its 900,000 shares between July and September. National Oilwell Varco’s revenues have been up strongly, and even its net income grew at a double digit rate between Q3 2011 and last quarter. Still, the stock trades at 12 times trailing earnings with analysts expecting considerable growth on the bottom line next year and beyond.
Chilton and his team also increased their stake in Freeport-McMoRan Copper & Gold, Inc. (NYSE:FCX) by 75% to a total of 1.8 million shares. As with most of the other stocks on this list, Freeport McMoRan experienced a decline in revenue and earnings in its most recent quarter compared to the same period in the previous year. It’s also tied closely to the overall economy, with a beta of 2.3, as copper is something of a barometer for macro conditions. The trailing P/E multiple is 12, with analysts expecting strong earnings growth next year (their estimates imply a forward P/E of 8). It’s a good way to play strong global growth, particularly if an investor is bullish on China, but would otherwise be fairly risky.