Pamplona Capital Is Heavily Betting On These 4 Companies for Q2

Moscow-born Alexander Knaster set up his British private equity firm Pamplona Capital in 2005. At the end of the first quarter, the two main sectors represented in the firm’s equity portfolio were the consumer discretionary and industrials sectors, with them contributing 35% and 37% respectively. The fund held about $57.34 million worth of U.S equities at the end of March and the portfolio was heavily concentrated, with positions in just four different companies (seven holdings in total, four of which are made up of one company’s various classes of stock). Pamplona Capital will be looking for better returns from its stock picks in the second quarter, as its five holdings in stocks with a $1 billion market cap delivered a weighted average returns loss of 4.6% in the first quarter. Towards that goal, the fund did add two new positions to its portfolio during the first quarter. With that in mind, let’s dig deeper into the firm’s favorite stocks, which it appears to be quite confident in given the lack of diversification in its portfolio.

Our research determined that following the small-cap stocks, that hedge funds are collectively bullish on, can help a smaller investor beat the S&P 500 by around 95 basis points per month (see more details here).

#4 Methanex Corporation (USA) (NASDAQ:MEOH)

 – Shares Owned by Pamplona Capital (as of March 31): 218,600

 – Value of Holding (as of March 31): $7.02 Million

Pamplona initiated a position in the $3 billion producer and supplier of methanol in the first quarter. Although up by about 1.58% so far this year, Methanex Corporation (USA) (NASDAQ:MEOH)’s stock has cratered by nearly 40% over the last year, while the commodity chemicals industry has posted average gains of 1% during the last 12 months. Both TD Securities and Citigroup downgraded the company last month, to ‘Hold’ and ‘Neutral’ respectively, from what were previously ‘Buy’ ratings. The analysts believe that the expected ramp in methanol prices in 2017 has already been factored into the company’s stock price, while on a more near-term basis, the market continues to look volatile and challenging for the first half of this year despite the recent stabilization of methanol prices. D E Shaw, founded by veteran investor David Shaw, held 504,000 shares of Methanex Corporation (USA) (NASDAQ:MEOH) at the end of the fourth quarter.

#3 Northstar Realty Europe Corp (NYSE:NRE)

 – Shares Owned by Pamplona Capital (as of March 31): 726,200

 – Value of Holding (as of March 31): $8.42 Million

Northstar Realty Europe Corp (NYSE:NRE) was Pamplona’s other newly initiated holding during the first quarter. The company’s stock is up by 2% so far this year and currently has a dividend yield of about 5%. The $747 million real estate investment trust (REIT), which invests in commercial properties, announced in January that it had hired Goldman Sachs to seek strategic options. This was followed by an activist campaign by Land and Buildings, a hedge fund run by former Citigroup analyst Jonathan Litt, which nominated six directors to the company’s board. Another money manager bullish on the company is Steve Cohen, whose Point72 Asset Management held about 3.30 million shares of Northstar Realty Europe Corp (NYSE:NRE) at the end of December.

We delve into Pamplona Capital’s two favorite companies on the next page.

#2 Liberty Global plc – Class A Ordinary Shares (NASDAQ:LBTYA)

 – Shares Owned by Pamplona Capital (as of March 31): 309,850

 – Value of Holding (as of March 31): $11.93 Million

During the March quarter, Pamplona reduced its Liberty Global plc – Class A Ordinary Shares (NASDAQ:LBTYA) holding by 32%. The firm also holds 196,700 shares of Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK) after slashing that holding by 43% during the first quarter. In addition, the fund owns 20,900 shares of Liberty Global PLC LiLAC Class A (NASDAQ:LILA) and about 19,300 shares of Liberty Global PLC LiLAC Class C (NASDAQ:LILAK). The LiLAC Group accounts for the company’s operations in Chile and Puerto Rico. While declining cable customers has been a sore point for Liberty Global, broadband and mobile customers are on the rise. Moreover, the company is also capitalizing on the opportunity to up-sell customers, as by the end of 2015, 45% of its customers had subscribed to a triple-play product, 17% to a double-play product, and 38% to a single-play product. The company’s merger with Vodafone for its operations within the Netherlands, which is expected to close by the end of this year, will make triple-play an even more compelling option for customers in the country. Barry Dargan’s Intermede Investment Partners raised its stake in Liberty Global plc – Class A Ordinary Shares (NASDAQ:LBTYA) by 67% to 583,300 shares during the fourth quarter.

#1 Aecom (NYSE:ACM)

 – Shares Owned by Pamplona Capital (as of March 31): 685,500

 – Value of Holding (as of March 31): $21.1 Million

After being trimmed by 2% in the first quarter, Pamplona’s Aecom (NYSE:ACM) holding represented about 37% of the firm’s U.S equity portfolio. Shares of the $4.6 billion fully integrated global infrastructure company have climbed by a little over 1% so far this year, while the construction & engineering industry has posted average gains of 4.5% during this period. In its financial results for the first quarter of fiscal year 2016 ending December 31, Aecom (NYSE:ACM) delivered EPS of $0.68, which beat analysts’ consensus estimate by $0.08, though revenue of $4.3 billion was $80 million short of expectations. Bernard Selz‘s Selz Capital hiked its Aecom (NYSE:ACM) stake by 70% during the fourth quarter, to 170,000 shares.

Disclosure: None