According to a recent 13D filing with the SEC, Phill Gross (pictured) and Robert Atchinson‘s Adage Capital Management has hiked its stake in Olin Corporation (NYSE:OLN) by about 82%, lifting the holding to 4.31 million shares valued at $85.94 million, based on the current stock price. The position now amasses about 5.56% of the company’s outstanding stock.
Gross and Atchinson worked together at Harvard Management Company (HMC) before establishing their own Boston-based firm in 2001. During the near-decade they worked together at HMC, the duo managed to beat the S&P 500 index by an average of 4.5 percentage points on an annual basis. Currently, Adage Capital has about $48.2 billion worth of assets under management, while the market value of the fund’s public equity portfolio stands at $40.10 billion. About 19% of these holdings are in the healthcare sector, with 16% in the technology sector.
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Professional money managers were bullish towards the company during the second quarter. The valuation is even more attractive now, with a forward earnings multiple of 10.59, and on top of that, a healthy dividend yield of 4.01. Among the more than 700 hedge funds that we track at Insider Monkey, 24 had aggregate holdings worth $271.50 million at the end of June compared to 22 firms with $165.63 million in shares at the end of March. While Adage Capital is the largest stockholder among these funds, it is followed by Steve Cohen‘s Point72 Management, which increased its stake to 4.94 million shares in July. Point 72 is followed by Robert Henry Lynch‘s Aistela Capital, which initiated a holding in the company during the June trimester of 1.5 million shares valued at $40.43 million.
Adage has held a stake in Olin Corporation (NYSE:OLN) since the fourth quarter of 2014. The $1.53 billion chemicals company, which operates in three main segments: Chlor Alkali Products, Chemical Distribution, and Winchester has hit a rough patch recently, as its stock is down by more than 12% year-to-date. In stark contrast, the specialty chemicals industry has posted average gains of 9.32% during the same period. Things took a turn for the worse after Olin Corporation (NYSE:OLN) missed both the top and bottom line estimates with its first quarter financial results. Although the company’s second quarter EPS of $0.54 was $0.24 ahead of estimates, revenues of $535.4 million were $18.3 million lighter than expected, and the stock price began a prolonged descent over the following months.
Market prices have been another prime factor weighing down on Olin Corporation (NYSE:OLN)’s performance. Even though chlorine prices have improved slightly, they have been more than offset by the tumbling price of caustic soda. However, following the finalization of its acquisition of Dow Chemical’s chlor alkali division in the fourth quarter, which will almost double the size of Olin Corporation (NYSE:OLN), this pricing problem will be reined in. The number of chlorine-based products will increase to 19 from three, removing the cyclicality aspect of its products. Moreover, the epoxy and chlorinated organic business being acquired are much more sensitive to manufacturing costs than the market pricing. Olin Corporation (NYSE:OLN) expects to realize about $200 million worth of synergies from this acquisition, with the manufacturing cost of some of its products being slashed by one-third.
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