Richard McGuire’s Marcato Trims Exposure to Top Picks; Buys Signet Jewelers, CSC

Marcato Capital Management is a San Francisco-based hedge fund sponsor that Richard McGuire founded in 2010, after leaving Bill Ackman‘s Pershing Square. The firm last disclosed an equity portfolio worth more than $1.23 billion as of June 30. Following a number of moves, which included three new positions and two stakes closed during the second quarter, Marcato’s holdings were focused on consumer discretionary companies, which amassed 48% of the portfolio’s total value and financial stocks, which represented 34% of the equity portfolio at the end of June. In this article, let’s take a closer look into the fund’s most notable moves during the second quarter.

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#5. Computer Sciences Corporation (NYSE:CSC)

– Number of Shares Held By Marcato Capital (as of June 30): 1.34 million

–Value of Marcato Capital’s Holdings (as of June 30): $66.8 million

Let’s start with Computer Sciences Corporation (NYSE:CSC), in which Marcato initiated a new stake during the second quarter of the year, becoming one of the 31 funds in our database long the stock. Also bullish on the IT firm was Ken Griffin’s Citadel Advisors, which bought more than 2.03 million shares between April and June, inclusive, taking its holdings to 2.05 million shares. Shares of Computer Sciences Corporation (NYSE:CSC) have gained more than 43% year-to-date, although most of the rise happened over May. In fact, since the beginning of the third quarter, shares have lost 3.5%. Earlier this month, the company reported first quarter EPS of $0.53 on revenue of $1.93 billion, beating the Street’s consensus estimates by $0.08 and $20 million, respectively.

#4. Signet Jewelers Ltd. (NYSE:SIG)

– Number of Shares Held By Marcato Capital (as of June 30): 1.36 million

–Value of Marcato Capital’s Holdings (as of June 30): $112.3 million

An even larger new position was in Signet Jewelers Ltd. (NYSE:SIG). During the second quarter, McGuire’s fund purchased 1.36 million shares of the company, becoming the second largest shareholder in our database, only trailing Thomas Steyer’s Farallon Capital, which held 2.81 million shares, following a 48% increase in its exposure. Signet Jewelers Ltd. (NYSE:SIG) has had a tough year, having lost almost 35% of its value since January. However, most of the losses were realized over the first half of the year. Until last week, it looked like the stock was staging a rebound, but plummeted after the company reported its financial results, which included second-quarter EPS of $1.14 and revenue of $1.38 billion, lower than estimates by $0.31 and $60 million, correspondingly. In addition, the company’s management said same-store sales had tumbled by 2.3% over the quarter, and cut its full-year forecast, guiding for a same-store sales decline of 1% to 2.5%.

#3. Goodyear Tire & Rubber Co (NASDAQ:GT)

– Number of Shares Held By Marcato Capital (as of June 30): 4.92 million

–Value of Marcato Capital’s Holdings (as of June 30): $126.4 million

Marcato’s third-largest stake was represented by Goodyear Tire & Rubber Co (NASDAQ:GT), which fell one position in relation to March 31, even though the fund’s stake was boosted by 2% over the second quarter – as the stock lost 21.7% of its value. A total of 34 funds among those we track were long the stock, including Phill Gross And Robert Atchinson’s Adage Capital Management, which upped its exposure by 29% over the second quarter, disclosing ownership of 8.48 million shares as of the end of June. Since the second quarter ended, shares of Goodyear Tire & Rubber Co (NASDAQ:GT) have managed to recuperate more than 13.75%, largely on the back of an earnings beat in late-July. For the second quarter, the company posted revenue of $3.9 billion, down by 6.5% year-over-year, and $20 million below the Street’s consensus. However, EPS of $1.16, which came in $0.13 ahead of expectations, and reiterated financial targets helped the stock gain ground.

#2. Sothebys (NYSE:BID)

– Number of Shares Held By Marcato Capital (as of June 30): 5.27 million

–Value of Marcato Capital’s Holdings (as of June 30): $144.4 million

The case for Sothebys (NYSE:BID) was the opposite: while Marcato trimmed its participation by 11% during the second quarter, the stock ascended one spot in this list, as the shares gained 2.85% over the period. Overall, 16 funds from our database held over 31% of Sotheby’s stock at the end of the second quarter. Shares of Sothebys (NYSE:BID) have spiked by 48.2% since June 30, mostly on the back of better-than-expected results for the second quarter. EPS of $1.51 came in $0.46 ahead of expectations, while revenue of $298.67 million beat estimates by $7.45 million. Also helping the stock was a 90 bps increase in the auction margin rate, to 16.4%.

#1. Bank of New York Mellon Corp (NYSE:BK)

– Number of Shares Held By Marcato Capital (as of June 30): 10.54 million

–Value of Marcato Capital’s Holdings (as of June 30): $409.6 million

Finally, there’s Bank of New York Mellon Corp (NYSE:BK), which has occupied the first place in McGuire’s 13F portfolio since the third quarter of 2014. However, the stock saw the fund trim its stake by 43% over the second quarter of 2016, as the stock advanced by 4.6%. Also notable was the position of Warren Buffett’s Berkshire Hathaway, which held 20.82 million shares of the company. Since the second quarter ended, Bank of New York Mellon Corp (NYSE:BK) has seen its stock gain 8.5%, even in spite of its relatively high forward P/E ratio of 12x and not-so-high dividend yield of 1.86%. On Monday, subsidiary Pershing LLC said it would launch a new mutual fund and ETF aimed at “emerging and mass-affluent investors.”

Disclosure: Javier Hasse holds no interest in any of the securities or entities mentioned above.