WCG Management is a New York-based macro hedge fund managed by Barry Wittlin. It specializes in trading bonds, currencies and interest rate swaps. The fund controls more than $13 billion in assets. WCG recently disclosed its long equity positions as of June 30, 2014, worth almost half a billion dollars, and we will take a look at them. These companies are: General Motors Company (NYSE:GM), Stanley Black & Decker, Inc. (NYSE:SWK) and CF Industries Holdings, Inc. (NYSE:CF).
Mr. Wittlin’s fund’s largest bet was placed on General Motors Company (NYSE:GM), the $53.2 billion market cap U.S. auto manufacturer. Following a 47% increase in its stake over the second quarter, the fund owns 640,669 shares of Common Stock, worth more than $23 million. This position accounts for more than 9.5% of the fund’s equity portfolio’s total value.
As many investors know, Warren Buffett’s Berkshire Hathaway is the largest hedge fund shareholder of record (amongst those we track) at General Motors Company (NYSE:GM). The investment guru last disclosed ownership of 32.96 million shares of Common Stock, after a 10% increase in its exposure over the second quarter. Berskshire’s position is worth almost $1.2 billion.
General Motors Company (NYSE:GM)’s stock is down 18.5% year-to-date, but still trades at 29 times the company’s earnings, more than double its industry’s average valuation; still, its margins and returns are razor thin. So, why are these hedge funds so bullish? Well, most of them could be betting on a slow recuperation, as U.S. car sales bounce back from its 2009 lows: competitiveness in all segments and a much lower cost base than before 2009 bode very well for the company’s future.
Second in line is Stanley Black & Decker, Inc. (NYSE:SWK), a $14.4 billion market cap provider of power and hand tools, products and services for various industrial applications, mechanical access solutions and electronic security and monitoring systems. Between April 1 and June 30, WCG boosted its exposure to the company by 28%, and now owns 194,974 shares of the company, worth more than $17 million. This makes of WCG one of the top 10 hedge fund shareholders of record at the company.
Even larger are other institutional investors’ bets. For instance, John W. Rogers’ Ariel Investments last disclosed ownership of 1.45 million shares, and Phill Gross and Robert Atchinson’s Adage Capital Management reported holding 931,367 shares.
Same as in General Motors Company (NYSE:GM)’s case, dividends play an important role for Stanley Black & Decker, Inc. (NYSE:SWK) investors. With a strong balance sheet and a history of increasing dividends, the current 2.2% yield looks quite attractive.
Last in this list is CF Industries Holdings, Inc. (NYSE:CF), a $12.5 billion market cap manufacturer and distributor of nitrogen and phosphate fertilizer products in North America. Once again, WCG augmented its wage on the company over the second quarter of 2014, and now owns 70,500 shares of Common Stock, worth more than $17 million, which account for roughly 7% of the fund’s total equity portfolio. John Burbank’s Passport Capital and D. E. Shaw are the largest hedge fund shareholders of record, with slightly more than 1 million shares each. They both increased their stakes in CF Industries Holdings, Inc. (NYSE:CF) over the second quarter.
Yet again, CF Industries Holdings, Inc. (NYSE:CF) is a dividend stock, which pays a 2.4% yield. Despite industry leading fundamentals (margins, returns and growth history), the stock still trades at about half its industry’s average valuation, at only 8.8 times the company’s earnings. Despite all of these pros, there is one thing on which investors should keep an eye: debt. The company is quite leveraged, carrying a 1.0x debt-to-equity ratio, compared to a 0.4x industry mean.
WCG has been making the news in the past few years, in account of one of its employees, portfolio manager Ryan Reich being scrutinized by U.S. prosecutors. However, the probe in which he was involved did not concern WCG directly: he was contacted because, a few years earlier, working for Barclays Plc, he had sent inappropriate emails about “Libor.”
Disclosure: Javier Hasse holds no positions in any stocks or funds mentioned.
