Nehal Chopra’s Top Moves Going Into 2016

Diversification has been a buzzword in the investment industry for a long time. However, many retail investors still don’t utilize it enough as a fundamental strategy that can help them to reduce the overall risk in their portfolios. They think diversification restricts them from generating superior returns by not allowing them to bet heavily in stocks they perceive as future strong performers. Such critics of diversification were proven wrong big time last year. While the broader market delivered flat returns for 2015, several investors and funds with concentrated portfolios ended the year with large losses because the few stocks they were invested in turned out to be duds. One such fund was Nehal Chopra’s Ratan Capital Group. According to Bloomberg, Ratan Capital Group’s flagship fund, Tiger Ratan, ended 2015 with a loss of 19%. However, Insider Monkey’s own analysis of the fund’s 13F holdings shows that the long positions held by Ratan Capital Group during 2015, in companies worth over $1 billion, delivered a weighted average return of 3.1% for the year. The reason those two return figures differ drastically is because we don’t include a fund’s investments in bonds, currencies, derivatives, currencies or its short positions in our calculations. It does however show that Ratan’s long stock picks performed fairly well, while other aspects of its portfolio were suspect. With that in mind, we’ll take a look at Ratan Capital’s biggest moves (and one non-move) in its long positions during the fourth quarter, according to its recent Form 13F filing with the SEC.

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Let’s start with Valeant Pharmaceuticals Intl Inc (NYSE:VRX), a stock which Ratan Capital Group sold off during the fourth quarter. Valeant Pharmaceuticals Intl Inc (NYSE:VRX)’s stock plummeted heavily between August and October of last year, which was one the main reasons behind Tiger Ratan’s poor overall performance in 2015. This year, the company has lost another 20% of its capitalization. Valeant Pharmaceuticals is expected to report its fourth quarter earnings early next week and analysts anticipate that it will report EPS of $2.61 on revenue of $2.75 billion. For the same quarter of the preceding year, the company reported EPS of $2.58 on revenue of $2.28 billion. On February 25, analysts at Canaccord Genuity reiterated their ‘Buy’ rating and $170 price target on Valeant, suggesting greater than 100% upside potential. Bill Ackman‘s Pershing Square, which also suffered greatly in 2015 under the weight of a Valeant Pharmaceuticals Intl Inc (NYSE:VRX)position, reduced its stake in the stock by 15% to 16.6 million shares during the fourth quarter.

Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) was a new addition to Ratan Capital Group’s equity portfolio during the fourth quarter, as the fund bought 650,000 shares of the company valued at $30.12 million as of December 31. Despite the rout in the Chinese equity markets this year, Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) is trading down by only 9.8% year-to-date, which shows investors’ conviction in the stock. Most analysts believe that even though hard times await the Chinese economy going forward, travel spending in China will nonetheless continue to grow and Ctrip.com will be a major beneficiary of that. Analysts also think that when taking into account the projected growth of the industry, the company’s stock is undervalued right now, trading at a trailing enterprise-value-to-revenue multiple of only 5.72. Yi Xin‘s Ariose Capital also initiated a stake in Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) during the fourth quarter, purchasing 319,488 shares.

Moving on, Ratan Capital Group didn’t make any changes to its stake in Charter Communications, Inc. (NASDAQ:CHTR) during the fourth quarter as it continued to own 341,600 shares of the company worth $62.55 million as of December 31. Shares of the company have moved up over the past few days in anticipation of its merger with Time Warner Cable Inc (NYSE:TWC) and Bright House Networks being completed without any major hiccups. Owing to the recent rally, Charter Communications, Inc. (NASDAQ:CHTR)’s stock is currently trading down only marginally year-to-date, by 1%. On February 19, the company announced that it managed to successfully raise $1.7 billion in debt through a bond offering. As of December 31, the company had nearly $36 billion of debt on its balance sheet, out of which $21.8 billion was earmarked in escrow accounts for its merger deals. On February 2, JPMorgan Chase & Co. analyst Philip Cusick upgraded Charter Communications, Inc. (NASDAQ:CHTR) to ‘Overweight’ from ‘Neutral’, while keeping his price target on it unchanged at $210. Stephen Mandel‘s Lone Pine Capital reduced its stake in the company by 28% to 4.73 million shares during the October-to-December period.

Ratan Capital Group’s conviction in Post Holdings Inc (NYSE:POST) is paying off in a major way this year. The fund increased its stake in the company by 3% to 2.32 million shares during the fourth quarter, making Post Holdings Inc (NYSE:POST) its second-largest equity holding going into 2016. Owing to the better-than-expected earnings the company reported for the fourth quarter on February 4, shares of Post Holdings Inc (NYSE:POST) are currently trading up by over 13.6% year-to-date. While analysts were expecting the company to report EPS of $0.36 on revenue of $1.33 billion, Post Holdings Inc (NYSE:POST) reported EPS of $0.52 on revenue of $1.25 billion. According to analysts, consumer goods stocks like Post Holdings are safe bets for investors at current levels given the decline in the broader market. On February 8, analysts at BMO Capital Markets reiterated their ‘Outperform’ rating on the stock, while increasing their price target on it to $75 from $72. Billionaire John Paulson‘s Paulson & Co also increased its stake in the company by 11% to 4.1 million shares during the December quarter.

The 15% rise in Allergan plc Ordinary Shares (NYSE:AGN)‘s stock during the fourth quarter coupled with Ratan Capital Group more than doubling its stake in the company to 402,486 shares during the same period propelled Allergan plc Ordinary Shares (NYSE:AGN) to the top spot in the fund’s equity portfolio as of the end of December. In anticipation of the company’s fourth quarter results, shares of Allergan plc Ordinary Shares (NYSE:AGN) recently started moving higher and are now trading down by 4.62% year-to-date. However, they have yet to break the $300 mark, which technical analysts feel will act as major resistance for them going forward. For the fourth quarter Allergan plc Ordinary Shares (NYSE:AGN) reported EPS of $3.41 on revenue of $4.20 billion, topping EPS projections of $3.36, while meeting revenue expectations. According to a recently released report by the group Americans for Tax Fairness, if  the merger of Allergan plc Ordinary Shares and Pfizer Inc. (NYSE:PFE) is eventually completed, the latter will be able to avoid paying $35 billion in taxes to the U.S government. However, eminent tax and accounting consultants think that figure is misleading.

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