Billionaire Clint Carlson Makes Big Moves In These 4 Stocks

Hedge fund managers and other money managers follow different re-balancing strategies, which seems appropriate if bearing in mind the wide pool of strategies and styles employed by various investors. It appears that Carlson Capital L.P. started its re-balancing process at the end of 2015, considering that the Dallas-based fund submitted numerous 13G filings with the SEC earlier this month. Carlson Capital is a multi-strategy asset management firm founded by Clint Carlson in 1993, and manages over $8 billion in assets under management. The investment firm primarily engages in risk arbitrage strategies, relative value arbitrage (long/short equity pairs) strategies, cross asset credit arbitrage, and long/short equity thematic. Having this in mind, let’s proceed with the discussion of four 13Gs filed by Carlson Capital and the recent performance of the companies in question.

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According to a Schedule 13G filing, Carlson Capital L.P. currently owns 4.70 million shares of Kindred Healthcare Inc. (NYSE:KND), which account for 5.61% of the company’s outstanding common stock. This compares with the 3.50 million-share position disclosed by the fund through its 13F filing for the September quarter. A healthcare services company, Kindred operates transitional care hospitals, a home health, hospice and community care business, inpatient rehabilitation hospitals, a contract rehabilitation services business, and nursing centers and assisted living facilities. The shares of Kindred Healthcare Inc. (NYSE:KND) are down by 48% over the past year and they seem to be looking for a bottom at the moment.

Kindred Healthcare reported revenue of $5.27 billion for the nine-month period that ended September 30, up from $3.76 billion reported for the same period a year ago. Despite generating noticeable top-line growth, Kindred failed to impress with its bottom-line results. The company reported a loss from continuing operations of $107.85 million for the first nine months of 2015, compared to income of $9.70 million reported for the same period of 2014. Nonetheless, analysts anticipate earnings per share of $1.02 for fiscal year 2016, which yields an attractive forward price-to-earnings ratio of 9.32 (the forward P/E for the S&P 500 stands at 15.75). A total of 35 hedge funds tracked by Insider Monkey were invested in the company at the end of the third quarter, accumulating 30.80% of its shares. Conan Laughlin’s North Tide Capital holds a 5.00 million-share position in Kindred Healthcare Inc. (NYSE:KND) as of the end of the third quarter.

The next two pages reveal and discuss the other three 13Gs filed by Carlson Capital.

In a separate 13G filing, the Dallas-based fund reported owning 1.78 million shares of Exterran Corp (NYSE:EXTN), representing 5.05% of the company’s outstanding common stock. On November 3, Archrock Inc. (NYSE:AROC) (called Exterran Holdings Inc. prior to this date) completed the spin-off of its international contract operations, international aftermarket services, and global fabrication businesses into an independent company named Exterran Corporation. It should be mentioned that Carlson Capital owned 6.64 million shares of Exterran Holdings as of September 30. Most importantly, each Archrock shareholder, including Carlson Capital, received one share of Exterran Corp (NYSE:EXTN) for every two shares of Archrock’s common stock owned on November 3. Therefore, Clint Carlson’s investment firm, which received roughly 3.32 million shares of Exterran Corporation (assuming Carlson Capital still owned 6.64 million shares of Exterran Holdings at the beginning of November), nearly halved its stake in the newly-created company since early November. Meanwhile, the freshly-formed company represents a market leader in the provision of compression, production and processing products and services that serve the oil and natural gas industry, so its financial performance is highly dependent on the level of energy industry spending. Its shares have declined by nearly 19% since the beginning of November, presumably because of the sustained decline in crude oil prices and the spending cuts by players in the industry as a result.

Moving on to the next 13G filing, Carlson Capital disclosed an ownership stake of 9.40 million shares in Dynegy Inc. (NYSE:DYN), which accounts for 7.79% of the company’s shares. This marks an increase of 5.17 million shares from the positon revealed through the fund’s 13F filing for the third quarter. The shares of the independent power producer have dropped by 60% over the past year, mainly owing to the depressed gas prices. Despite that, Dynegy Inc. (NYSE:DYN) reported revenue of $2.85 billion for the nine months that ended September 30, up by $956 million year-over-year. That substantial increase amid a challenging business environment was mainly attributable to the company’s freshly-acquired plants. At the same time, the mild temperatures and increased precipitation levels have put significant pressure on the demand for Dynegy’s output in its generation areas, which led to lower volumes and prices compared to 2014. In December, SunTrust Robinson Humphrey reiterated its ‘Neutral’ rating on the stock and cut its price target on it to $11 from $15, citing continued pressure on forward gas prices. The number of smart money investors with stakes in the company declined to 40 from 52 during the third quarter, but the bullish hedgies still amassed 44.30% of the company’s outstanding shares. Jamie Zimmerman’s Litespeed Management reported owning 4.66 million shares of Dynegy Inc. (NYSE:DYN) through its 13F for the July-to-September period.

Last but not least, the multi-strategy asset management firm disclosed owning 12.41 million Class A shares of Cosan Limited (USA) (NYSE:CZZ) via another 13G filing. That figure represents a decrease from the 2.28 million shares disclosed through the fund’s 13F for the September quarter. The newly-trimmed stake accounts for 7.37% of the company’s outstanding common stock. Cosan operates several businesses in strategic sectors important to Brazil’s development, including logistics and energy. Cosan S.A., Cosan Logística, Comgás, Raízen, Rumo, Cosan Lubrificantes and Radar are the companies that form the organization. Comgás is the largest natural gas distributor in Brazil, while Rumo is among the leaders in the transport of sugar for exportation. The company’s Cosan Lubricants produces and markets automotive and industrial lubricants, while Raízen produces ethanol and sugar.

It should be mentioned that a substantial part of Cosan Limited (USA) (NYSE:CZZ)’s debt is denominated in U.S dollars, so the depreciation of the real against the greenback increases its debt burden. Nonetheless, some of the company’s receivables and financial assets are denominated in dollars, which somewhat offsets the negative impact of the depreciation of the Brazilian currency. Shares of the company are down by 61% over the past year, while its future course strongly depends on the strength of the Brazilian economy. A mere 15 hedge funds from our database had positions in Cosan Limited at the end of the third quarter, stockpiling 8.80% of its shares. Jos Shaver’s Electron Capital Partners cut its position in Cosan Limited (USA) (NYSE:CZZ) by 6% during the September quarter to 1.16 million shares.

Disclosure: None