Paritosh Gupta runs Adi Capital Management, a fund that has around $135 million in its equity portfolio and follows a strategy similar to the approach used by his wife, Nehal Chopra, who runs Ratan Capital Management. They both invest in companies that are in a transition process, or that are under the process of management changes or a merger. The similarity between the two competing hedge funds has raised many questions in the past, some claiming that it is unethical, especially taking into account that Ratan has had outstanding returns, which amounted to almost 23% in the first quarter of 2014.
Adi Capital has filed its first 13F, disclosing its equity portfolio as of the end of 2014, which allows us to take a look at the performance of the fund, whose portfolio contained a total of 15 long positions. The weighted average return of these 15 holdings, which are all represented by companies with a market cap of over $1.0 billion, amounted to 7.8%. This return is much lower than Ratan’s, whose five holdings had a weighted average return of over 23% during the same period. Let’s take a closer look at Adi’s five largest holdings, which are represented by Actavis plc (NYSE:ACT), FCB Financial Holdings Inc (NYSE:FCB), AerCap Holdings N.V. (NYSE:AER), Navient Corp (NASDAQ:NAVI), and Hologic, Inc. (NASDAQ:HOLX).
The importance of analyzing 13F filings is often overlooked, many considering that the 45-day delay of the filing erases any opportunities to benefit from the data that is provided in those filings. However, taking into account that most funds invest for the long-term, it still possible to get some insights from 13F filings. At Insider Monkey we track over 700 funds as part of our small-cap strategy, which involves imitating a portfolio of the 15 most popular small-cap stocks among these funds. This system generated a double-digit annual alpha and outperformed the S&P Total Return Index by almost 1.0 percentage point per month. In the last 2.5 years, our strategy managed a performance of over 137%, beating the benchmark by 80 percentage points (read more details here).
Adi Capital’s largest position was in Actavis plc (NYSE:ACT), with the fund reporting ownership of 68,000 shares valued at $17.50 million in its 13F filing. Actavis also represents the largest position in Ratan’s equity portfolio. The company is the most popular healthcare stock among the funds we track and investors have been right betting on Actavis plc (NYSE:ACT), whose stock appreciated by more than 50% in the last 52 weeks and gained 15.6% in the first three months of 2015. Actavis has been acquiring other companies for the last several years, transforming itself into one of the largest pharmaceutical companies in the world. The company’s acquisition of Allergan, its most recent, is expected to further fuel Actavis’ growth and the company is even planning to change its name to Allergan. The rebranding will better reflect the company’s aim to maintain its presence as a leader on the pharmaceutical market. Andreas Halvorsen, Dan Loeb, Daniel Och, Larry Robbins, and Barry Rosenstein are a few other investors with large long positions in Actavis plc (NYSE:ACT) as of the end of 2014.
In FCB Financial Holdings Inc (NYSE:FCB), Adi reported a $13.55 million stake that contains 550,000 shares. FCB Financial Holdings Inc (NYSE:FCB) is a $1.1 billion bank holding company that provides services primarily to individuals and small- and medium-sized companies. Its stock has gained 11.08% since the beginning of the year, while appreciating by over 27% since the company went public in August 2014. Amid this growth, the company captured the attention of some great investors such as Dan Loeb and Leon Cooperman, whose funds initiated stakes during the fourth quarter. The largest shareholder of FCB Financial Holdings Inc (NYSE:FCB) among the funds we track is Paul Singer‘s Elliott Management, which boosted its position fivefold during the fourth quarter to 2.58 million shares.
Next in line is AerCap Holdings N.V. (NYSE:AER), a $9.8 billion provider of finance services for the aviation business, whose stock gained 12.4% in the first three months of 2015. Adi Capital disclosed ownership of almost 321,000 shares valued at $12.46 million in its 13F filing. One of the largest shareholders of AerCap Holdings N.V. (NYSE:AER), American International Group has recently announced plans to sell its stake in the company that amasses 97.56 million shares, representing 46% of the outstanding stock. Another top shareholder of AerCap Holdings N.V. (NYSE:AER) is activist Barry Rosenstein’s JANA Partners, which owns 11.09 million shares, according to its latest 13F filing.
Adi Capital also reported a $12.07 million stake in Navient Corp (NASDAQ:NAVI), which contains 558,500 shares. Navient is another financial company that is engaged in collecting and servicing loans. However, the position did not turn out to be profitable, as the stock lost 5.8% during the first quarter amid the company reporting a decline in revenue for the fourth quarter and for the full year 2014. In addition, Navient Corp (NASDAQ:NAVI) is currently trying to reach a deal with the US Department of Education regarding the cheating of active-duty troops on federal student loans. The company, which is the largest student loan provider in the US, is accused of breaking the law that provides certain special financial protections for active-duty military members. Among Navient Corp (NASDAQ:NAVI)’s largest shareholders are billionaires Leon Cooperman, David Shaw, and Israel Englander.
The fifth company on our list does not represent one of the top ten positions in Adi’s equity portfolio, but it had a significant impact on the fund’s returns due to the stock’s appreciation by 23.5% during the first three months of 2015. In Hologic, Inc. (NASDAQ:HOLX), Adi reported holding close to 124,600 shares, valued at $3.33 million, which makes the stake the 13th largest in terms of value. Overall among the funds that we track, 31 investors reported long positions in Hologic, Inc. (NASDAQ:HOLX) as of the end of last year, including four billionaire investors. The largest stake is held by activist Carl Icahn, who disclosed 34.15 million shares in his latest 13F filing. In addition, Mr. Icahn has two representatives on Hologic, Inc. (NASDAQ:HOLX)’s board of directors.
Disclosure: None
