Atlantic Investment Management is an activist hedge fund, founded by its current CIO and portfolio manager, Alexander J. Roepers back in 1988. Prior to starting his own fund, Mr. Roepers cut his teeth as a Director of Corporate Development at Thyssen-Bornemisza Group, where he was in charge of acquisitions and divestitures. He also worked at Dover Corporation, AJR International, Quest Capital Partners, and was a Portfolio Manager of Deutsche Markt Trust – Deutsche Strategic Equity Long/Short Fund. Mr. Roepers holds a Bachelor of Business Administration degree from Nyenrode Business University and a Master of Business Administration degree from Harvard Business School. Aside from his immense investment acumen, Mr. Roepers has various social skills such as fluency in Dutch, French, and German.
What sets apart Atlantic Investment Management from many other activist hedge funds is Mr. Roepers’ more skillful approach to the boards of the companies. In other words, you won’t read much in the newspaper about Atlantic Investment Management fights with the boards of the companies it invests in. Just because there isn’t a public story, doesn’t mean there isn’t a story at all. Mr. Roepers does get involved in the management of the companies he finds undervalued and pushes for the changes he believes will help the companies raise their value.
What’s more important his ideas for the changes come from serious analyses as the fund gets together with the peers of the companies for serious analyses of the competition. Atlantic Investment Management’s team also meets with the CEOs of the companies, trying to really comprehend why the companies are undervalued, what is missing. Since Atlantic Investment Management is a global research firm, it has analysts from Europe and Asia, and it doesn’t shy away from interviewing a bunch of companies not only in the US, but also in Europe and Japan. In that manner, it accumulates a broad knowledge with which it develops the best possible solution for the improvement of a company’s business.
This investment strategy has brought back some serious positive returns throughout the years. Atlantic Investment Management’s Cambrian fund has returned annualized 16.1% since its inception in 1992, and last year it was up by 9.7%. Its Cambrian Global fund delivered an annualized return (since its inception in 2012) of 12%, and AJR/Quest returned 9.9% annualized since its founding in 1993, while its even younger fund, Quest Europe, had an annualized return since its outset (in 2006) of 4.4%, and gained 17.5% in 2017. Both Quest Japan and Pannotia Fund, Atlantic’s Investment Management’s two other funds, were up by 21.5% and 12.8% in 2017, respectively. According to fund’s most recent annual letter (from January 25, 2018), Atlantic Investment Management has $1.3 billion of assets under management. Its 13F portfolio is currently worth around $645.18 million.
Three months ago at the Delivering Alpha Conference, Mr. Roepers revealed his new best idea – Huntsman Corporation (HUN), a manufacturer of various organic and inorganic chemical products. Mr. Roepers disclosed that since the company has made some important changes in its operations, including dismissing some, it has become more efficient. Because of that, Mr. Roepers predicted attractive returns of up to 60% in the course of the next 12 to 18 months, explaining that the company will probably earn $4.40 a share, accounting for the upside price potential that he noted.
Furthermore, Atlantic Investment Management’s CIO held the opinion that Huntsman Corporation (HUN) is both a promising takeover target and an acquirer, although he predicted it to bring back cash to shareholders in the meantime. Mr. Roepers was clearly enthusiastic about the management’s future actions with cash balances and cash flows.
Well, investors who attended CNBC’s conference paid around $31.41 per share to follow Alex Roepers into Hunstman Corporation (HUN). Even though the stock’s price went as high as $33.55 in the following weeks, Huntsman shares currently change hands at $23.59 and haven’t been this cheap since June of 2017. Investors must have been spooked by the unintended consequences of the trade war between China and the US. The real question that we need to answer at this point is whether Huntsman still has the potential to earn $4.40 a share over the next 12 months. If Alex Roepers is right about the stock, it now has 100% upside potential.
We are going to take a closer look at the historical performance of all of Roepers’ 13F stock picks and dissect Roepers’ Huntsman thesis in the next issue of our monthly activist newsletter and decide whether it is a good idea to follow him into Huntsman.
Insider Monkey’s stock picks in our monthly activist newsletter returned 58.4% since its inception in March 2017 through the end of September. S&P 500 ETF (SPY) returned 26.2% during the same period. Our discretionary stock picks based on our analysis of the performance of activist hedge funds outperformed the market by 32 percentage points in just 18 months. You can download a free copy of this newsletter by creating a free account.
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