In a 13G filing on Western Refining Inc. (NYSE:WNR), investment management firm D.E. Shaw & Co., founded by David E. Shaw, disclosed a 5.1% ownership stake in the company consisting of 4.88 million shares. This marks an increase of 593,511 shares of the fund’s position in the crude oil refiner compared to the stake disclosed in the latest 13F filing.
D. E. Shaw & Co. is a quantitative hedge fund founded by billionaire David E. Shaw in 1988 with seed capital of $28 million. The fund’s primary trading method is computer-driven, based on proprietary computational methodologies developed and implemented by David Shaw and his team. David Shaw is no longer actively involved in the fund’s day-to-day operations, but still remains engaged in some higher-level strategic decisions. The New York-based investment management firm has grown considerably under the stewardship of David Shaw, currently managing more than $37 billion in assets under management. The hedge fund focuses its investing approach on advanced and detailed techniques to profit from pricing anomalies and patterns across a wide range of asset classes. At the moment, the investment management firm is overseen by Louis Salkind, who was among the first ones joining the firm. According to its 13F filing, D. E. Shaw & Co. manages a large public equity portfolio worth $65.29 billion, with the top ten holdings accounting for only 10.68% of its entire portfolio.
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Western Refining Inc. (NYSE:WNR) is an independent crude oil refiner and marketer of refined products headquartered in El Paso, Texas. The company also operates service stations and convenience stores. Put differently, Western Refining operates in two business segments: refining and retail. The company’s refining segment operates two refineries that generate an output of approximately 151,000 barrels of crude oil per day. In addition to that, Western Refining serves as the general partner and owns approximately 66% of the limited partnership interest in Western Refining Logistics LP (NYSE:WNRL), but also serves as the general partner of Northern Tier Energy LP (NYSE:NTI) with 38% of the limited partnership interest. The shares of Western Refining have grown by 16% since the beginning of the current year, but analysts believe there is more upside potential for the company.
RBC Capital Markets, a Canadian investment bank, has recently initiated coverage of Western Refining and provided a brief overview on the future outlook of the crude oil refiner. The analyst set a ‘Sector Perform’ rating with a price target of $48 and said that Western Refining owns and operates an exceptional asset portfolio, which includes two of the most advantaged refineries in the United States. However, the independent crude oil refiner is on the horns of a dilemma: to purchase the remaining 62% of Northern Tier Energy or to sell its refineries to Northern Tier Energy. According to the analyst at RBC, the uncertainty around the Northern Tier Energy deal might hold back the company’s expansion and growth in the medium term.
Just yesterday, Western Refineries reported its financial results for the second quarter of 2015. The independent crude oil refiner posted net income, excluding special items, of $138 million or $1.44 per diluted share, compared to $128.8 million or $1.29 per diluted share reported a year ago. Meanwhile, the company reported net sales of $2.83 billion for the quarter, significantly lower than $4.35 billion a year earlier.
Considering the fact that oil prices are unlikely to recover soon as Saudi Arabia boosts its refining activities, Western Refining can gradually enhance its margins. Therefore, it is highly probable that the stock will have a relatively stable performance over the short- to medium-term. From the pool of over 700 hedge funds that we track, Jim Simons’ Renaissance Technologies is among the largest shareholders in Western Refining Inc. (NYSE:WNR) with an ownership stake of 1.64 million shares as of the end of March.
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