Prior to forming Alyeska, Parekh worked at Deutsche Bank until 2002, and then joined Citadel Investment Group as global head of equities. Parekh graded from the University of Michigan with degrees in English and Mathematics.
Outlined below were Alyeska’s five largest holdings at the end of June, according to the firm’s 2Q 13F filing, —see all of Alyeska’s holdings here. Three of Alyeska’s top five holdings were new positions.
The largest holding and newest position, was Accenture PLC (NYSE:ACN). Accenture made up 34% of Alyeska’s 2Q 13F portfolio and is a global management-consulting firm. Even amidst an economic slowdown, Accenture has managed to gather several new and extended contracts, including those with a Brazilian communications company, a European energy giant and several U.S. agencies. Next year’s earnings are expected to be modest at 8% given a weak economic outlook, particularly in Europe, where IT spending is being delayed. However, Accenture is expected to make improvements in operating margins—with 2012 estimated to be 13.8% versus 2011 13.6%—due to higher margin consulting services and the use of subcontract labor.
Alyeska also made new positions out of its second and third largest holdings, both of which were acquired by other companies shortly after the end of 2Q. The second largest stock holding at 2.7% of Alyeska’s 13F holdings was Progress Energy Inc. and the third largest holding was Goodrich Corp. In July, Progress and Duke Energy Corp. (NYSE:DUK) finalized their year long merger talks—see which funds are now betting on the Duke-Progress giant. The transaction was stock-for-stock, and Progress will continue as a wholly owned subsidiary of Duke. The combined company will boast a strong balance sheet and continued non-regulated power segment earnings. Not to mention, Duke pays a strong dividend yielding 4.8%.
United Technologies Corporation (NYSE:UTX) completed its $16.5 billion Goodrich acquisition shortly into 3Q; the combined companies should be able to capitalize on an upswing in the commercial aircraft market, as well as capitalize on long-term growth in commercial and residential construction in emerging markets. However, with the Goodrich deal complete, management lowered its 2012 sales guidance to $58-$59 billion from $61-$62 billion and its EPS forecast to $5.25-$5.35 from $5.30-$5.50.
The fourth largest holding was yet another new position, Solutia Inc. (NYSE:SOA). Solutia is a global manufacturer of performance materials and specialty chemicals. Earlier this year, at the end of January, Eastman Chemical Company offered to acquire Solutia for $27.65 per share, representing a premium of 42 percent and a total transaction value of approximately $4.7 billion. The company currently trades around $27.82.
The fifth largest holding was actually a company Alyeska reduced its 1Q stake by 19% in, Hubbell Inc. (NYSE:HUB.A), and now makes up only 1% of Alyeska’s 13F portfolio. The electrical parts manufacturer reported 2Q earnings for the second quarter that saw sales of $778 million and earnings per diluted share of $1.29, as compared to net sales of $709 million and earnings per diluted share of $1.07 reported for the second quarter of 2011. A rebound in residential and non-residential construction should prove beneficial for the company given its exposure to these areas—this will help drive the expected 18% growth in EPS next year. However, there have been a number of insider sales within the company of late.
As far as interest from the funds we track, Accenture called Lansdowne Partners the largest fund shareholder as of 2Q, with 9.3 million shares—representing 10% of Lansdowne’s 2Q 13F portfolio. Accenture also had billionaire investors Jim Simons and Cliff Asness upping their 1Q takes by 41% and 20%, respectively.
Going into the quarter prior to the Goodrich buyout, three firms had around 30% or more their 2Q 13F portfolio invested in the company—Davidson Kempner at 47%, EAC Partners at 33% and Taconic Capital at 29%. Although insiders have made exits in Hubbell lately, there were two top billionaire fund managers in the company at the end of 2Q—Chuck Royce and Steven Cohen.
Overall, Alyeska is betting big on management consulting and a strengthening European company. The firm also had interesting bets on merger deals and even took a new position, in Solutia, where the trading value is already above the buyout offer—suggesting that perhaps with Solutia’s strong performance, Eastman may have to up its offer.
