Continuing with a trend started a few months ago, Michael Johnston’s Steelhead Partners has yet again cut down its exposure to Resolute Forest Products Inc (NYSE:RFP). According to two recent Form 4 filings, the fund disposed of 102,917 shares of Common Stock since October 16. Steelhead Partners now owns 12.15 million shares of the company, which account for more than 12% of its total shares outstanding.
Steelhead Partners is a Bellevue, Washington-based investment advice firm founded by Scott Schaefer and Michael Johnston in late 1996. It usually uses contrarian investment strategies. According to its own website, Steelhead’s “investment style is characterized by finding names that are out-of-favor and under-followed by Wall Street,” which have consistently led it to opportunities with exceptional risk/reward profiles. According to its latest 13F filing, the fund holds an equity portfolio worth more than $1.27 billion, with a slight focus on tech stocks. Previous to founding Steelhead, Johnston had worked at Prudential Insurance and Loews Corporation, where Scott Schaefer worked as well.
Resolute Forest Products Inc (NYSE:RFP) is a $1.7 billion market cap global forest products company that owns or operates pulp and paper mills and wood products facilities in the United States, Canada and South Korea. Its segments include newsprint, coated papers, specialty papers, market pulp and wood products. Steelhead Partners’ aforementioned stock sales are not isolated; the fund has been trimming its exposure for a while now. The latest transactions were made for prices ranging from $17.29 per share to $18.00 per share.
But, why is Steelhead selling its stock, if forecasts for Resolute Forest Products Inc (NYSE:RFP) look quite encouraging? Well, although long-term growth estimates are attractive, the current stock price has almost reached the median price target set by analysts; so, upside potential for the short and medium-term is not so big.
Despite this fund’s bearishness, Zacks recently upgraded the company from a “neutral” rating to an “outperform” rating, and set a $18.60 price target (well above the current price of $17.75). Also quite bullish seems Prem Watsa’s Fairfax Financial Holdings, which last disclosed ownership of more than 29 million shares -by the end of the second quarter of the year.
Resolute Forest Products Inc (NYSE:RFP) is Steelhead’s largest equity position, and is up about 10.8% year-to-date, compared to the S&P 500’s 6.3% surge. Moreover, its second-largest bet, placed on Globalstar, Inc. (NYSEMKT:GSAT), has returned more than 29.1%; so, trailing Mr. Johnston’s moves might not be a bad idea.
Disclosure: Javier Hasse holds no positions in any stocks or funds mentioned
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