Gates Capital Loves Material Stocks, Especially These Five

#3 Mercer International Inc. (NASDAQ:MERC)

– Shares Owned by Gates Capital Management (as of June 30): 10.96 Million

– Value of The Holding (as of June  30): $87.46 Million

Moving on, Gates Capital Management inched up its stake in Mercer International Inc. (NASDAQ:MERC) by a meager 1% during the second quarter. Shares of the pulp manufacturer have been on a downward path since April last year and have lost 8.84% of their value so far this year. The company started paying quarterly dividends from the second-half of 2015. The $0.12 per share quarterly dividend it currently pays, amounts to a lucrative forward yield of 5.51%. For its most recent quarter, Mercer International Inc. (NASDAQ:MERC) declared a per share loss of $0.07 on revenue of $218.15 million, considerably below analysts’ expectation of EPS of $0.03 on revenue $233.01. Though the number of hedge funds covered by us that reported being long in the stock increased by three to 21 during the second quarter, the aggregate value of their holdings in it declined by $29 million to $166.23 million during that time.

#2 Axalta Coating Systems Ltd (NYSE:AXTA)

– Shares Owned by Gates Capital Management (as of June 30): 3.89 Million

– Value of The Holding (as of June  30): $103.18 Million

Axalta Coating Systems Ltd (NYSE:AXTA) was a new position in Gates Capital Management’s equity portfolio. The company had its IPO in November 2014 at 19.50 per share and its stock has appreciated by over 43% since going public, but several analysts think that it can see further upside. According to them, the company’s recent financial numbers have been negatively impacted by currency fluctuations, but on a constant-currency basis it has been performing well and will continue to do so going forward. On September 8, analysts at Credit Suisse Group AG reiterated their ‘Overweight’ rating and $34 price target on the stock. At the end of June, there were 43 funds tracked by us that were long Axalta Coating Systems Ltd (NYSE:AXTA) with the aggregate value of their holdings in it amounting to $2.16 billion.

#1 GCP Applied Technologies Inc (NYSE:GCP)

– Shares Owned by Gates Capital Management (as of June 30): 4.41 Million

– Value of The Holding (as of June  30): $114.96 Million

Despite Gates Capital Management reducing its stake in the company by 15% during the second quarter, GCP Applied Technologies Inc (NYSE:GCP) continued to remain the fund’s top pick from the materials sector at the end of June. GCP Applied Technologies Inc (NYSE:GCP) has returned 38% since it started trading as a separate publicly traded entity earlier this year after it was spun-off from W. R. Grace & Co. (NYSE:GRA). Last month, the company reported its second-quarter earnings, declaring net income of $30.1 million on revenue of $366.3 million for the period, compared to a net income of $27.2 million on revenue of $373.15 million registered a year earlier. The popularity of GCP Applied Technologies Inc (NYSE:GCP) among investors covered by us increased marginally during the second quarter with its ownership among them increasing by the three to 30 and the aggregate value of their holdings in it rising by 16% to $757 million.

Disclosure: None