Billionaire Lemann Bets Heavily On Canada, Energy, Railways

Jorge Paulo Lemann is one of the richest people in the world with a net worth of around $27 billion. He is the founder of investment fund giant 3G Capital Partners LP along with fellow billionaires Carlos Alberto Sicupira and Marcel Herrmann Telles. These three founders, who are famously known as the “Three Musketeers” in Brazil, have acquired some of the biggest global consumer companies through their private equity firm. The fund is also heavily focused on the energy sector, with stocks from this industry forming 43% of the fund’s total 13F holdings at the end of September, 2016. In the article below, we look at some the fund’s top holdings.

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Canadian Pacific Railway Limited (USA) (NYSE:CP) is the 4^th largest 13F holding of 3G Capital Partners, with the fund holding shares valued at $77.8 million at the end of the third quarter. During this quarter, the fund added 434,054 shares, making it the fund’s biggest 13F buy. Canadian Pacific operates a transcontinental railway in Canada and the United States with a train network of 12,500 miles. The company reported better than expected revenues and earnings in the last quarter. Topline of $1.55 billion with a net income of $320 million handily beat analyst expectations for the third quarter. Canadian Pacific Railway Limited’s (USA) (NYSE:CP) ownership among funds covered by us increased by 1 to 32 during the third quarter. The aggregate value of their holdings in the stock increased to $2.23 billion from $2.13 billion quarter over quarter.

Halliburton Company (NYSE:HAL) is the fund’s second largest 13F energy holding. 3G Capital Partners initiated a position in this stock by buying 1.5 million shares during the third quarter. The stock formed 5.38% of the funds total 13F portfolio at the end of September, 2016. Halliburton Company (NYSE:HAL) is one of the biggest service providers to the upstream oil and gas industry with a market value of $45 billion. It’s stock price has seen a recovery in tandem with the increase in crude oil prices. Analysts are mostly upbeat about this company with 32 out of the 41 porfessionals covering the stock rating it as a buy. The new Trump administration and OPEC deal could be positive catalysts for the stock in the near term. However, the company’s popularity decreased amongst the funds that we track, going down to 56 in the third quarter from 62 during second quarter.

Enbridge Inc. (USA) (NYSE:ENB) is another energy favorite of 3G Capital Partners, with the fund adding 500,000 shares to its existing 1 million shares during the third quarter. The fund held $66.2 million of this stock at the end of September, 2016 making it the 5^th largest 13F holding. Like other energy stocks, Enbridge Inc. (USA) (NYSE:ENB) has also given a handsome return of 21% over the last one year. Analysts have an overwhelmingly favourable view of this company with 7 analysts out of the 9 covering this stock rating it as a buy and none rating it as a sell. The company recently announced that it would merge with Spectra Energy Corporation (NYSE:SE) to form the largest energy infrastructure company in USA with an enterprise value of around $127 billion. By the end of the third quarter, 21 funds from our database held shares worth $286.4 million in this stock,  compared to $191.5 million held by 15 funds during the second quarter.

Encana Corp (USA) (NYSE:ECA) is a Canadian based oil and gas company in which 3G Capital owned shares worth $62.8 million at the end of the third quarter. The fund bought a new position in this company, good for around 5% of the fund’s 13F portfolio value as of September 30th. The stock has been on a tear over the last 3 months. Encana Corp (USA) (NYSE:ECA) has been upgraded both by Barclays and RBC Capital. The average analyst rating is “overweight” with a mean target price of $17.3 per share. The company reported good quarterly results after decreasing its operating costs by 30% over the last one year and slashing its debt by $2 billion over the last one quarter. As per our records, the number of funds having Encana Corp (USA) (NYSE:ECA) in their portfolio increased by 11 to 37 in the third quarter. They held almost 17% of the company’s float at the end of quarter three.

Union Pacific Corporation (NYSE:UNP) is another railroad company in which 3G Capital Partners bought a fresh position during the third quarter. The fund now holds $11.68 million of this stock accounting for 0.9% of the fund’s total 13F holdings as of the end of September. Union Pacific Corporation (NYSE:UNP) owns rail networks across 20 states in the western part of USA and connects with the railroad systems in Canada and Mexico. The company reported a 90 basis points increase in operating margins to 37.9% in the third quarter while the net margin remained more or less constant at 21.8%. CEO Lance Fritz said that he was seeing green shoots in sectors such as grain and energy, though challenges continue from the broader economy. The new Republican administration, with its focus on infrastructure spending, could be a positive for the company. The number of funds in our system positive on the stock increased to 62 in Q3 from 55 in the second quarter. However, the value of their total holdings declined to $2.5 billion from $2.55 billion quarter over quarter.

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