Hedge fund operator Ken Griffin is the founder and CEO of Citadel, one of the world’s most successful alternative investment firms. It has over $103 billion in assets under management (AUM) and Griffin likes to cast a wide net when making investments. Citadel has over 6,000 individual stocks in its portfolio.
Although well-known and respected for his investing acumen, Griffin came under fire from retail investors during the meme stock craze in 2021. Because he also owns Citadel Securities, one of the largest market makers in the U.S., traders didn’t understand the wall of separation between the two firms. So as GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC) stock soared during the trading frenzy, firewalls kicked in and temporarily halted trading on the names. It prevented traders from buying more shares and making a profit.
Internet investors alleged he pressured online brokerage Robinhood (NASDAQ:HOOD) to help hedge funds that were bleeding massive losses during the short squeeze. Citadel also helped bail out industry peer Melvin Capital, which had a massive short position on GameStop, with a $2 billion cash injection to keep it from going under. It still ended up closing shop as a result.
Citadel remains quite successful. And with a choppy market, even multi-billion-dollar investors such as Ken Griffin are turning to dividend stocks for safety. The three stocks below are the biggest buys in dividend stocks Ken Griffin made last quarter.
Hess (HES)
The biggest purchase Ken Griffin made in the first quarter was oil stock Hess (NYSE:HES). Citadel went from holding a few hundred thousand shares of the exploration and production (E&P) company in the fourth quarter of 2023 to owning 9.3 million shares in this year’s first quarter. He now owns $1.4 billion worth of Hess stock.
Griffin apparently wanted to get in on the oil industry consolidation wave that is underway. He also purchased 4.5 million shares of Pioneer Natural Resources, which Exxon Mobil (NYSE:XOM) recently completed its acquisition of. Hess is in the process of being bought by Chevron (NYSE:CVX) though Exxon is trying to grab its premier Guyana oil field asset. If successful, it could scuttle Hess’ tie-up with Chevron.
While Hess is up 24% from its recent lows, the stock is down 8% from its 52-week high. It could be due to concerns that Exxon might just be successful in arbitration. It’s a risky play by Griffin but one that could pay off big if it comes through. With his average buy price at $147 per share, he is currently up almost 5% on the bid but could earn more as Chevron is paying $171 per share for Hess. The E&P play pays a dividend that yields 1.3% annually.
Bank of America (BAC)
Griffin is following in the footsteps of Warren Buffett with his next purchase, that of Bank of America (NYSE:BAC). While Buffett hasn’t bought any BAC stock in years, it is one of the few financial stocks he refused to sell during last year’s regional banking crisis. The bank is one of those that Buffett has signaled he might never sell. He owns around 1 billion shares of BAC.
Citadel, however, scooped up almost 23 million shares in the first quarter, raising its stake to over 28 million shares. That brings the value of the hedge fund’s holdings to just under $1.1 billion with Griffin’s average buy price at less than $35 a share. Smart move because Bank of America still appears undervalued and ready for a reversal even though the stock now trades at $40 a stub.
One of the biggest banks in the country, Bank of America stock took a hit last year during the banking crisis. While it was never at risk, generalized fear of the safety of the banking system shook most banks. BAC also has significant assets sensitive to high interest rates. The unprecedented rate increases imposed by the Federal Reserve further increased investor concern. That helped the financial institution’s unrealized losses balloon to $122.8 billion. Yet because almost all of those losses ($109.2 billion) are in its held-to-maturity portfolio, there is little likelihood they will be realized.
It remains a solid bank and a wise choice for Griffin. Bank of America’s dividend yields 1.5% a year.
Gilead Sciences (GILD)
The last big bet Griffin made in dividend stocks was Gilead Sciences (NASDAQ:GILD). The biopharmaceutical develops and commercializes antiviral therapies for treating HIV, hepatitis and cancer. Its biggest drug is Biktarvy for the treatment of HIV. Patents on it don’t run out until the mid-2030s and the drug generated $11.9 billion in revenue last year.
Other big billion-dollar therapies in Gilead’s portfolio include Genvoya ($2.1 billion in 2023), Descovy ($2 billion) and Odefsey ($1.35 billion). These drugs are offsetting the decline of older drugs like COVID-19 antiviral Veklury. It was the first FDA-approved antiviral on the market and Gilead generated significant revenue from it in 2020 and 2021. It still made $2.2 billion in sales last year but they are rapidly fading. In 2022, it generated nearly $4 billion from the treatment.
Griffin bought almost 4 million shares at an average price of $77 per share. It values his holdings at almost $1.1 billion though the stock trades around the $64 per share level. The stock is down 27% from recent highs and is off 20% year-to-date. Gilead Sciences’ dividend, though, can soften the blow as it yields 4.9% annually.
On the date of publication, Rich Duprey held a LONG position in CVX and XOM stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
