In mid May, Atlantic Investment Management- a hedge fund with about $2 billion in assets under management which is run by Alexander Roepers- filed its 13F with the SEC, disclosing many of its long equity positions in U.S. stocks as of the end of March. We track 13Fs from hundreds of hedge funds and other notable investors and have found that these filings can be a useful source of information; for example, the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year (learn more about our small cap strategy). We also like to mine individual funds’ filings for interesting investment ideas. Here are our brief thoughts on Atlantic’s five largest holdings by market value at the end of Q1 2013 (compare these picks to those in previous filings):
Owens-Illinois Inc (NYSE:OI) was the fund’s top pick as of the beginning of April, with the filing disclosing ownership of 8.7 million shares. The $4.7 billion market cap glass container manufacturer did not do well in the first quarter of 2013, with earnings falling 43% versus a year earlier off of a 6% decrease in sales. Wall Street analysts are projecting that the company will recover, however, and as a result the forward P/E for Owens-Illinois is 9. Arrowstreet Capital initiated a position of 6.1 million shares during the fourth quarter of 2012 (research more stocks Arrowstreet was buying).
Atlantic slightly increased its holdings of Ashland Inc. (NYSE:ASH) between the beginning of January and the end of March, to a total of 2.5 million shares. Ashland is a specialty chemicals and materials company with a market capitalization of $6.9 billion. It has actually been in a similar position to Owens-Illinois: business struggling recently, trailing earnings being fairly low, the sell-side being bullish to the degree that their forecasts have the stock as a potential value play. Relational Investors, which is managed by Ralph Whitworth and his team, owned 1.7 million shares of Ashland at the end of December.
Roepers has taken profits on his investment in Rockwood Holdings, Inc. (NYSE:ROC), which is still one of his largest holdings by market value even after selling nearly half of his shares. Another specialty chemicals company, Rockwood is up 32% year to date. However, we would note that net income was down considerably in its most recent quarter compared to the same period in the previous year despite a small increase in revenue. Barry Rosenstein’s JANA Partners reported a position of 2.8 million shares in its most recent 13F filing (see Rosenstein’s stock picks).
Oil States International, Inc. (NYSE:OIS) has been a hot name recently; JANA has taken a large stake in the company and plans to push to spin out one of its business units, while billionaire David Einhorn of Greenlight Capital recently gave a presentation arguing that the stock is undervalued (read why these investors like Oil States). Atlantic has increased its stake to 1.9 million shares. As the oilfield equipment and services company is currently organized, the trailing and forward earnings multiples both clock in at 13 (even to slightly above where its peers trade). Oil States is also an analyst darling, with a five-year PEG ratio of 0.8.
The fund has cut its stake in Energizer Holdings, Inc. (NYSE:ENR) and owned 1.3 million shares at the beginning of April, down from 2.2 million shares three months earlier. The provider of batteries and personal care products (it owns the Schick and Playtex brands, for example) saw a 9% increase in earnings last quarter compared to a year ago, but revenue was about flat. At 16 times trailing earnings, Energizer does have to deliver moderate earnings growth to justify its current valuation. GAMCO Investors, managed by billionaire Mario Gabelli, owned 1.3 million shares at the end of 2012 (find Gabelli’s favorite stocks).
Disclosure: I own no shares of any stocks mentioned in this article.
