3G Capital is a Brazilian investment firm that currently manages an investment portfolio worth roughly $1.17 billion. The private equity fund co-founded by billionaire Jorge Paulo Lemann is most well-known in the finance world for its acquisition of Burger King in 2010 and for its collaboration with Berkshire Hathaway, whose chairman is Warren Buffett, in the purchase of Heinz in 2013. Most recently, 3G Capital and Berkshire Hathaway joined forces yet again in the merger of Kraft and Heinz, which will result in one of the biggest food and beverage companies in the world. The Brazilian investment firm is currently managed by one of its founding partners, Alexandre Behring, who joined the firm in 2005. This private equity fund’s investment portfolio contains 55 active positions as of March 31, as disclosed in its latest 13F filing with the SEC. Among 3G Capital’s equity holdings are several small-cap companies including Armstrong World Industries Inc. (NYSE:AWI), Axiall Corporation (NYSE:AXLL) and PBF Energy Inc. (NYSE:PBF).
Investment firms like 3G Capital are particularly noteworthy to us for their small-cap picks, just like the ones we’ll discuss in this article. That’s because history shows these top money managers are highly successful with their top small-cap picks while being not nearly as successful with their top large-cap stock picks. These firms are heavily invested in the success of their small-cap picks and have poured considerable resources into identifying undervalued or under-the-radar companies to invest in, which gives them a big advantage over the average investor. We have found that collectively, hedge funds’ top small-cap picks provide a great investment opportunity, with our strategy having returned over 139% since it was launched at the end of August, 2012 (see the details).
3G Capital reported a stake in Armstrong World Industries Inc. (NYSE:AWI) of 378,741 shares valued at $21.77 million, a slight decrease of 8,025 shares during the first quarter. 3G Capital sold a small amount of its holding during a quarter in which the company missed the Zacks Consensus Estimate, posting earnings of $0.37 per share against estimates of $0.40 per share. Moreover, Armstrong World Industries Inc. (NYSE:AWI) was recently downgraded to a “Neutral” rating by Citigroup, thus it might seem that 3G Capital is making the right call by decreasing its stake in the manufacturer of commercial and residential hardwood floors, which has a market cap of $3.16 billion. Nevertheless, it might take a while before we get a clear sight of the company’s direction. In spite of this, it is quite clear that some reputable hedge funds are still bullish on Armstrong World Industries. For example, Naya Capital led by Masroor Siddiqui and Bruce Emery owns 2.09 million shares, while Eton Park Capital owns 3.67 million shares.
3G Capital increased its stake in Axiall Corporation (NYSE:AXLL) by 100,000 shares during the first quarter, lifting its overall position to 400,000 shares, which are valued at $12.74 million as of the end of the first quarter. Although the share price of Axiall Corporation has suffered a decline throughout the last four weeks, it seems that the stock might get back on the right track as there are rumors circulating about a possible $3 billion joint venture with Lotte Chemicals to build an ethane cracker that can produce ethylene for Axiall Corporation. For the time being, a number of hedge funds seem to believe in the strong future performance of Axiall Corporation (NYSE:AXLL), which has a market cap of $2.58 billion. One of the hedge funds that remains bullish is Lomas Capital Management led by Daniel Lascano, which holds a stake of 488,467 shares.
3G Capital has also taken a long position in PBF Energy Inc. (NYSE:PBF), a $2.52 billion market cap petroleum refining company. 3G Capital opened a new position of 400,000 shares during the quarter worth $13.57 million. An article released by Credit Suisse suggests that refining companies may still have more upside as the momentum of the world economy grows. PBF Energy Inc., which is one of the largest petroleum refiners and suppliers of transportation fuels and other petroleum products in the U.S., beat the consensus profit estimates for its first quarter earnings by generating a profit of $87.32 million. PBF Energy Inc. delivered a strong financial performance during the quarter all around, while margins remain solid, suggesting that the company is on a good path. In the meantime, some other hedge funds, including the world’s 11th largest hedge fund, Baupost Group, managed by Seth Klarman, own sizable equity stakes in PBF Energy.
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