Billionaire Jacob Rothschild’s Top Bets This Quarter

By looking at the 20% appreciation in the stock of billionaire Jacob Rothschild‘s RIT Capital Partners (it’s listed on the London Stock Exchange under ticker RCP), it seems that the investment trust performed well in 2015. However, according to our analysis, the 11 long positions RIT Capital Partners held in US-listed companies with a market capitalization of over $1 billion delivered a weighted average loss of 10.7% for the year. As its recently submitted 13F filing revealed, RIT Capital reduced its stake in eight of its 10 holdings during the fourth quarter and closed three positions. According to the filing, RIT Capital Partners’ US equity portfolio at the end of December was worth $372.1 million, 13% lower over the quarter. Let us proceed to the five stocks, which RIT Capital Partners was betting on going into 2016.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas (see the details here).

#5 Monsanto Company (NYSE:MON)

Shares Owned by RIT Capital Partners (as of December 31): 360,000

Value of Holding (as of December 31): $35.47 million

Monsanto Company (NYSE:MON) was the only company among RIT Capital Partners’ seven largest holdings in which the fund increased its stake by 86% during the fourth quarter. Due to the slump in the agriculture commodity prices, shares of Monsanto Company (NYSE:MON) declined swiftly in the period between February and September of 2015 and although they bounced back during the fourth quarter, they have given up pretty much all of those gains this year by losing around 10%. On February 9, as part of an agreement with the SEC, the company agreed to pay $80 million in fines to settle charges against it of violating accounting rules and misstating earnings concerning its Roundup herbicide. The 24 prominent analysts  and brokerages who cover the stock currently have an average rating of ‘Overweight’ with an average price target of $29.73. Larry Robbins‘ Glenview Capital inched up its stake in the company by 4% to 14.08 million shares during the fourth quarter.

#4 Walt Disney Co (NYSE:DIS)

Shares Owned by RIT Capital Partners (as of December 31): 481,800

Value of Holding (as of December 31): $50.62 million

RIT Capital Partners trimmed its stake in Walt Disney Co (NYSE:DIS) by 5% during the fourth quarter. Shares of the entertainment and media giant have been declining in the last couple of months and currently trade down by 9.6% year-to-date. This decline has pushed the stock’s dividend yield to nearly 1.5%, but some analysts believe that despite the depreciation, the stock is still overvalued since it trades at an enterprise value to free cash flow (EV/FCF) of 24, while its free cash flow growth has been only 11.5% in the last quarter. On February 18, analysts at Deutsche Bank reiterated their ‘Hold’ rating on the stock, but lowered their price target to $113 from $114. Ric Dillon‘s Diamond Hill Capital reduced its stake in the company by 10% to 1.94 million shares during the fourth quarter.

#3 Comcast Corporation (NASDAQ:CMCSA)

Shares Owned by RIT Capital Partners (as of December 31): 898,500

Value of Holding (as of December 31): $50.7 million

Comcast Corporation (NASDAQ:CMCSA)’s stock also started 2016 on a weak note, but the rally in anticipation of their fourth quarter results has offset the decline and the stock is currently trading with year-to-date gains of 2.32%. Interestingly, Comcast Corporation’s was able to sustain its gains even though the company reported worse-than-expected fourth quarter numbers. While analysts had projected EPS of $0.82 on revenue of $18.76 billion, it reported EPS of $0.81 on revenue of $17.73 billion. Despite the earnings and revenue miss, most analysts are still bullish on the company, primarily because of the growth it has had despite a rise in cord-cutting. While RIT Capital Partners reduced its stake in Comcast Corporation (NASDAQ:CMCSA) by 5% during the fourth quarter, Alex Snow‘s Lansdowne Partners increased its stake by 5% to 29.35 million shares.

#2 McGraw Hill Financial Inc (NYSE:MHFI)

Shares Owned by RIT Capital Partners (as of December 31): 641,500

Value of Holding (as of December 31): $63.23 million

Amid an almost 14% rise of the McGraw Hill Financial Inc (NYSE:MHFI)’s stock during the fourth quarter, RIT Capital Partners cut its stake in the company by 4%. On February 4, along with its fourth quarter results, the company announced that later this year it would change its name (for the first time in its 128 year history) to S&P Global Inc. For the fourth quarter, McGraw Hill Financial Inc (NYSE:MHFI) declared EPS of $1.04 on revenue of $1.37 billion, versus analysts’ estimates of EPS of $1.02 on $1.38 billion in revenue. It also revealed that it bought back 5 million of its shares during the quarter, bringing its 2015 total buyback to 10 million shares, and still has 35 million shares under its current buyback program. Patrick Degorce‘s Theleme Partners increased its stake in McGraw Hill Financial by 7% to 1.63 million shares during the October-December period.

#1 Colgate-Palmolive Company (NYSE:CL)

Shares Owned by RIT Capital Partners (as of December 31): 1.04 million

Value of Holding (as of December 31): $69.02 million

Finally, Colgate-Palmolive Company (NYSE:CL) remained RIT Capital Partners’ top pick at the end of December despite the fund having reduced its stake by 4% during the fourth quarter. Shares of Colgate-Palmolive Company (NYSE:CL) have been largely range-bound for the past two years and according to most analysts there are no reasons for them to move higher in the short- to medium-term. The reasons they are not optimistic about the company’s future are its slow growth rates, the low annual yield of its stock in comparison to peers and the high valuation at 22.41 times forward earnings. The stock currently sports an average ‘Hold’ rating and has a consensus price target of $69.43. Billionaire Jim Simons‘ Renaissance Technologies also cut its stake in Colgate-Palmolive Company by 12% to 10.06 million shares during the fourth quarter.

Disclosure: None