Gifford Combs‘ Dalton Investments is a reputable investor with a focus on the finance sector, although the hedge fund has stakes in other industries, including technology and services. According to the fund’s 13F filing with the U.S. Securities and Exchange Commission for the period of June 30, 2015, it had an equity portfolio value of $322.95 million, down slightly from $323.79 million at the end of the first quarter. Dalton Investments posted an equity turnover of 23.33% for the second quarter and sported a concentrated portfolio, whereby its top ten holdings accounted for 81.33% of its aggregate portfolio. The Santa Monica, California-based hedge fund is a known long-term value investor, with $3.14 billion in assets under management. In 2012, it was named the Management Firm of the Year by AsiaHedge, having delivered the best risk-adjusted returns among its peers. The fund’s top picks going into the third quarter are Berkshire Hathaway Inc. (NYSE:BRK.B), Turquoise Hill Resources Ltd (NYSE:TRQ), and Micron Technology, Inc. (NASDAQ:MU). This article focuses on these three stocks.
We follow hedge funds like Dalton Investments because our research has shown that their stock picks historically managed to generate alpha even though the filings are up to 45-days delayed. We used a 60-day delay in our back tests to be on the safe side and our research showed that the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. After adjusting for risk, our calculations revealed that these stocks’ monthly alpha was 80 basis points. We have also been sharing and tracking the performance of these stocks since the end of August 2012, during which time they have returned 123%, outperforming the S&P 500 ETF by nearly 67 percentage points (see more details here).
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With that in mind, let’s first look at Berkshire Hathaway Inc. (NYSE:BRK.B) in which Dalton Investments reduced its stake by 14% to 344,016 shares valued at $46.82 million. This position represented 14.50% of its portfolio value. The multinational conglomerate holding company has asserted its commitment to developing renewable energy by setting up the world’s largest solar project in California. The Omaha, Nebraska-based company intends to sell the tapped energy to users in long-term agreements and is poised to earn massive revenue from the more than 1.7 million-solar-panels project. The Warren Buffett-run company recently orchestrated a deal that saw Kraft Foods Group Inc merge with H.J. Heinz to smooth out the operations of the two entities, forming one of America’s largest food and beverage companies. Value investor Whitney Tilson recently declared that Berkshire Hathaway Inc. (NYSE:BRK.B) is worth $267,000 per share, nearly 20% upside from the $214,000 it currently trades at. Billionaire Michael Larson‘s Bill & Melinda Gates Foundation Trust was long in the stock going into the third quarter of 2015 with 73.63 million shares valued at $10.63 billion, representing 57.01% of its total portfolio value. Boykin Curry’s Eagle Capital Management held 10.49 million shares valued at $1.51 billion.
In Turquoise Hill Resources Ltd (NYSE:TRQ), Dalton Investments didn’t touch its position, choosing to keep its 11.28 million shares, with a market value of $42.76 million as of March 31. The Canadian mineral exploration and development company has posted gains of 10.97% year-to-date and is currently sporting a price-to-earnings ratio of 26.73. The company recently announced a financing deal for Oyu Tolgoi, a massive underground copper and gold mine project in Mongolia, which is expected to be signed by year’s end. This came after the mother company, Rio Tinto plc (ADR) (NYSE:RIO) struck a deal with the Mongolian authorities for the $5.4 billion expansion project. At the end of the second quarter, Matthew Halbower‘s Pentwater Capital Management emerged as the biggest shareholder of the company out of the over 700 hedge funds in our database. The fund held a total of 137.55 million shares with a market value of $429.16 million after raising its stake in the stock by 4% during the quarter. Kenneth Mario Garschina’s Mason Capital Management followed at a distant second, with 40.70 million shares valued at $126.99 million, having reduced its stake by 38% in the first three months of the year.
Micron Technology, Inc. (NASDAQ:MU) emerged as Dalton Investments’ third-biggest holding, with its position of 2.07 million shares being valued at $39.05 million, representing 12.09% of its portfolio at the end of the second quarter. This was after the fund increased its stake in the stock by 16% during the quarter. Together with Intel Corporation (NASDAQ:INTC), the semiconductor devices company announced the unveiling of a breakthrough memory technology. This technology, 3D XPoint, has been said to deliver non-volatile memory speeds more than a thousand times faster than NAND, which is the leading non-volatile memory in the market at the moment. The slow PC market has seen the stock lose 43.24% year-to-date, but with the unveiling of the new technology, it’s believed that the stock will be able to reverse course in the future. At the end of the second quarter of 2015, billionaire David Einhorn‘s Greenlight Capital topped the list of the biggest shareholders of the stock out of the hedge funds tracked by Insider Monkey. It was long in the stock with 33.55 million shares valued at $910.20 million, representing 11.89% of its portfolio value. Andreas Halvorsen’s Viking Global raised its stake during the quarter by 55% to 31.15 million shares, valued at $844.99 million. Other notable shareholders include billionaire Seth Klarman’s Baupost Group, Eric Bannasch’s Cadian Capital, and billionaire Daniel S. Och’s OZ Management.
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