Ricky Sandler’s Eminence Capital has increased its passive stake in GNC Holdings Inc (NYSE:GNC), according to a Schedule 13G form submitted today to the SEC. The current stake of Eminence and its affiliates stands at 4.6 million shares, up from 3.73 million shares held previously, according to the last 13F filing. Emminence’s current stake in GNC accounts for 5.2% of the company’s outstanding common stock.
During the fourth quarter, Sandler trimmed GNC Holdings Inc (NYSE:GNC)’s stake by 12% to 3.72 million shares valued at $208.85 million. The stock has dropped by about 2.2% year to date. However, the company posted strong financial results for the fourth quarter which included an EPS of $0.61 beating estimates by $0.02 and $607.16 million revenues which were $7.79 million higher than expected. Dinakar Singh’s TPG-Axon Management Lp owns about 4.45 million shares of GNC Holdings Inc (NYSE:GNC) valued at $208.85 million.
Sandler founded Eminence capital in 1998 after working as a research analyst for Mark Asset Management. His investment philosophy involves an emphasis on pricing ‘growth of value’ and also virtues of short selling. . During the internet bubble and the growth obsession of 1999 when most value investors were down double digits, Sandler’s fund had positive gains to boast. Market value of his portfolio stood at $6.88 billion towards the end of 2014, with transport and information technology sectors constituting 30% and 27% of the portfolio value respectively. Sandler initiated new stakes in 19 companies during the fourth quarter, the most notable of which were in Pandora Media Inc (NYSE:P), Darling Ingredients Inc (NYSE:DAR), and Outfront Media Inc (NYSE:OUT).
All the companies mentioned above are large caps, which is not surprising taking into account that most popular stocks among over 700 hedge funds that we track are from the large-cap segment. Hence, an investor might be easily fooled into believing that investing in such companies is surely the path to outperform the market. However, our research has uncovered that immitating hedge funds’ large cap picks won’t help an investor to beat the market. Since these stocks are relatively unknown and have a higher chance to hide intrinsic value, there is a much better chance of benefiting from price inefficiencies. This led us to formulate a small cap strategy, the stock picks of which we have been sharing in our newsletters since 2012. The strategy beat the S&P 500 ETF (SPY) by a staggering 79.4 percentage points since August 2012 through March 2015 and returned 132% during that period.
With about 8.57 million shares valued at $152.79 million, Pandora Media Inc (NYSE:P) was the most valuable of Eminence’s new positions at the end of the fourth quarter. The stake constituted 2.22% of the fund’s portfolio value. During the fourth quarter the popularity of the internet radio services’ provider grew among the funds that we track and 43 firms had an aggregate investment of $909.78 million as compared to 37 funds with $1.3 billion a quarter earlier. Seymour Sy Kaufman and Michel Startk’s Crosslink Capital held the highest stake with 9.2 million shares valued at $164.14 million.
Pandora Media Inc (NYSE:P) is down by about 48% over the last 52 weeks. Competition from the likes of Apple Inc. (NASDAQ:AAPL) and Spotify has been tightening for the $3.41 billion company. Fourth quarter financial results were rather disappointing as Earnings per Share (EPS) of $0.18 missed estimates by $0.01 and revenues of $268 million also came in $8.53 million lighter than expected.
