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Viking Global Investors starts new positions 3Q 2013

Viking Global Investors starts new positions 3Q 2013 (Part 1 of 5)

Viking Global Investors starts new positions in LOW, BAC, DIS, BIDU, Sells BA, CX – 13F Flash (A)

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Viking Global Investors LP is an independent hedge fund management firm founded by Andreas Halvorsen, Brian Olson, and David Ott. It manages assets of around $20 billion and has offices in New York City, Greenwich, Connecticut, and Tokyo.

In Q3 2013, it started new positions in Lowe’s Cos. Inc. (LOW), Bank of America Corp. (BAC), The Walt Disney Co. (DIS), and Baidu Inc. (BIDU) and it sold Boeing Co. (BA) and Cemex SAB de CV (CX).

Abbreviated financial summaries and metrics for these securities are included below. Detailed analysis and recommendations require a subscription (more information at the bottom of the article).

Why buy Lowe’s Cos. Inc. (LOW)?

Home improvement retailer Lowe’s, which announced its results today, reported net earnings of $499 million for the quarter ended November 1, 2013—a 26% increase over the same period last year. However, the earnings and outlook were below analysts’ expectations. Revenue rose 7%, to $12.96 billion, from $12.07 billion last year. CEO Robert Niblock said this balanced performance resulted from its improved collaboration and execution within a strengthening home improvement market, adding that the home improvement industry is poised for persistant growth in the fourth quarter and further acceleration in 2014.

As of August 2013, Lowe’s had 1,758 stores, of which 1,717 are in the U.S.. The remaining stores are in Canada and Mexico. It had said in its 2Q earnings call that it plans to open ten more stores in the coming year. Lowe’s also recently declared a quarterly cash dividend of $0.18 per share. Analysts were expecting positive results from Lowe’s following rival Home Depot’s (HD) announcement of solid earnings that beat analyst estimates. Home Depot attributed its results to continuing improvement in the housing market and its solid operational performance. With the rebound in the U.S. housing market, home improvement retailers like Lowe’s and Home Depot will continue to see decent growth prospects. But mortgage rates increased last week to 4.35%, according to Freddie Mac, and this might affect the homebuilding and home improvement segments.

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Viking Global Investors founder Andreas Halvorsen is a Tiger Cub, having previously worked at legendary investor Julian Robertson’s Tiger Management. The firm follows a global long-short equity strategy. It conducts fundamental research-intensive stock selection across all industries and uses a bottom-up approach in analyzing stocks. Rather than undertaking analysis to explain past performance, Viking Global Investors analyzes its existing portfolio to anticipate future performance. Investors meet with company management and conduct background checks on key personnel, interview suppliers, customers, and competitors. The firm’s portfolio managers review the company’s products and services and consult with industry experts. The fund’s investments are primarily in equity securities, but it also has holdings in debt, credit, derivative, and other financial instruments.

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