GMT Capital Cuts Stake in Every Major Holding Going Into Q2

Thomas E. Claugus-led GMT Capital recently revealed its U.S equity portfolio as of the end of March via a 13F filing submitted with the SEC. Founded in 1993 by Mr. Claugus, the Atlanta-based firm is the global long/short equity investment manager of the Bay Resource Partners Funds. Mr. Claugus holds an MBA from the Harvard Business School and prior to founding GMT Capital worked at Rohm and Haas Company for 17 years. The firm currently manages assets in excess of $5 billion, nearly one-third of which is employee owned, and its public equity portfolio was worth $4.07 billion on March 31. According to GMT Capital’s latest 13F filing, its equity portfolio saw a quarterly turnover rate of 78.33% during the first quarter and its top-10 equity holdings amassed nearly 45% of its portfolio’s value on March 31. The filing also revealed that during the first quarter, the firm reduced its stake in each of its top five equity holdings, which we will be discussing in this article.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

#5 Capital One Financial Corp. (NYSE:COF)

 – Shares Owned by GMT Capital (as of March 31): 2.17 million

 – Value of Holding (as of March 31): $150.26 million

Let’s begin with Capital One Financial Corp. (NYSE:COF), in which GMT Capital reduced its stake by 4% during the first quarter. Shares of the bank holding company are trading down by 6.16% year-to-date, which has resulted from a greater than 9% drop since the company came out with its first quarter earnings on April 26. While analysts had expected the company to report EPS of $1.91 on revenue of $6.15 billion, Capital One Financial Corp. (NYSE:COF) declared EPS of $1.84 on revenue of $6.20 billion. According to analysts, despite the downside risks in the stock, it offers a decent margin of safety to potential investors at current levels given that it trades at a greater than 25% discount to its book value and boasts a healthy annual dividend yield of 2.33%. Ric Dillon‘s Diamond Hill Capital boosted its holding in the company by 28% to 4.96 million shares during the first quarter.

#4 Delta Air Lines, Inc. (NYSE:DAL)

 – Shares Owned by GMT Capital (as of March 31): 4.39 million

 – Value of Holding (as of March 31): $213.64 million

GMT Capital reduced its stake in Delta Air Lines, Inc. (NYSE:DAL) by 7% during the first quarter, during which shares were down by 3.6%. Things have gone from bad to worse, as shares are now trading down by nearly 19% year-to-date. The company recently became the biggest buyer of Bombardier’s CSeries narrow-body jets by placing an order for at least 75 planes, with an option to buy an additional 50 planes in the future. In an interview with Bloomberg published a few days ago, Delta Air Lines’ new CEO, Ed Bastian, revealed that the company is looking to expand its presence in Canada through a “broader partnership”, which has led to speculation that it might buy an equity stake in its Canadian codeshare partner, Westjet. Mehdi Mahmud‘s First Eagle Investment Management didn’t make any changes to its stake in Delta Air Lines, Inc. (NYSE:DAL) during the first quarter, owning nearly 3.03 million shares of the company at the end of March.

We’ll look at GMT Capital’s top-3 holdings on the next page.

#3 Entegris Inc (NASDAQ:ENTG)

 – Shares Owned by GMT Capital (as of March 31): 15.72 million

 – Value of Holding (as of March 31): $214.06 million

Moving on, GMT Capital marginally lowered its stake in Entegris Inc (NASDAQ:ENTG) during the first quarter, by 1%. Funds that initiated a stake in the electrical supplies company during the same period included Jim Simons‘ Renaissance Technologies, which purchased 149,690 shares. Though Entegris Inc (NASDAQ:ENTG)’s stock has lost 4.28% of its value this year, it boasts gains of over 600% over the last seven years. On January 25, analysts at Pacific Crest reiterated their $14 price target on the stock while upgrading their rating on it to ‘Overweight’ from ‘Equal Weight’. On April 26, Entegris reported first quarter EPS of $0.17 on revenue of $267 million, topping the consensus analyst estimates of EPS of $0.15 on revenue of $258.26 million. For the same quarter of the previous financial year, Entegris pulled in nearly identical figures of EPS of $0.18 on revenue of $263.40 million.

#2 Celanese Corporation (NYSE:CE)

 – Shares Owned by GMT Capital (as of March 31): 5.06 million

 – Value of Holding (as of March 31): $331.62 million

Amid a 2.2% drop in Celanese Corporation (NYSE:CE)’s stock during the first quarter, GMT Capital reduced its stake in the company by 3%. Though the stock of the specialty materials company is currently trading up by 3.72% year-to-date, it has mostly remained range-bound for the past year, oscillating between the $60 and $70 marks. Most analysts believe that trading at 9.80-times its 2017 earnings means that Celanese Corporation (NYSE:CE) is undervalued, especially when one takes into account the large amount of cash the company is sitting on and its expected earnings growth going forward. On April 29, analysts at Cowen and Company upgraded the stock to ‘Outperform’ from ‘Market Perform’ and also upped their price target on it to $80 from $66, which represents potential upside of 14.28%.

#1 United Continental Holdings Inc (NYSE:UAL)

 – Shares Owned by GMT Capital (as of March 31): 5.58 million

 – Value of Holding (as of March 31): $333.97 million

Despite GMT Capital reducing its stake in United Continental Holdings Inc (NYSE:UAL) by 7% during the first quarter, the company jumped a spot in the fund’s portfolio during the period to become its top stock pick going into the second quarter. Whether United Continental Holdings Inc (NYSE:UAL) can hold on to that spot by the end of this quarter is another matter, as shares have plummeted by over 25% so far in the second quarter. Most of those declines came after the company reported its first quarter results and provided weaker-than-expected guidance for second quarter passenger revenue per available seat mile. The holding company of United Air Lines reported EPS of $1.23 on revenue of $8.20 billion for the first quarter, compared to EPS of $1.52 on revenue of $8.60 billion that it delivered during the same quarter of last year. Donald Chiboucis‘ Columbus Circle Investors also brought down its holding in the company during the first quarter, by 4% to 2.76 million shares.

Disclosure: None