Segantii Capital’s Top Investment Ideas Heading Into Q4

Simon Sadler‘s Hong Kong-based Segantii Capital saw the value of its public equity portfolio rise to $437.33 million at the end of September from $111.84 million at the end of the previous quarter. While the finance sector represented 24% of this portfolio, the technology sector amassed 23%. In this article we will evaluate the investment prospects of the fund’s top five picks, which include HSBC Holdings plc (ADR) (NYSE:HSBC), Tata Motors Limited (ADR) (NYSE:TTM), Houghton Mifflin Harcourt Co (NASDAQ:HMHC), United Continental Holdings Inc (NYSE:UAL), and J M Smucker Co (NYSE:SJM).

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#5 J M Smucker Co (NYSE:SJM)

Shares held (as of September 30): 371,300

Total Value (as of September 30): $12.13 million

Percent of Portfolio (as of September 30): 5.17%

Segantii initiated a position in the $13.79 billion food and beverage company during the third quarter. Over the past 12 months J M Smucker Co (NYSE:SJM)’s stock has appreciated by more than 14.3%, which compares extremely favorably with the consumer staples sector that has seen gains of only 1.72% during the same period. Just this month the company announced that it is going to sell its U.S. canned milk brands and operations to Eagle Family Foods Group LLC. Among over 700 elite hedge funds that we track, John W. Rogers‘ Ariel Investments is one of the largest stockholders of J M Smucker Co (NYSE:SJM) holding 1.93 million shares as of the end of September.

#4 United Continental Holdings Inc (NYSE:UAL)

Shares held (as of September 30): 400,000

Total Value (as of September 30): $20.98 million

Percent of Portfolio (as of September 30): 4.80%

Another newly initiated stake, the airline holding company has seen its stock price depreciate by more than 10% so far this year. The company has landed on rather tumultuous times lately, with the ouster of its former CEO Jeff Smisek in September and the new CEO Oscar Munoz being on medical leave since mid-October owing to a heart attack. Munoz is expected to return in the first quarter of 2016. While the company marginally missed the bottom line estimates in its financial results for the third quarter, revenues were in line with expectations. GMT Capital, which is led by Thomas E. Claugus, is the largest shareholder of United Continental Holdings Inc (NYSE:UAL) within our database and owned about 6.77 million shares at the end of the second quarter.

#3 Houghton Mifflin Harcourt Co (NASDAQ:HMHC)

Shares held (as of September 30): 1.09 million

Total Value (as of September 30): $22.15 million

Percent of Portfolio (as of September 30): 5.06%

The stock price of the $2.55 billion global learning company has slid by over 8% since the start of this year. The company’s third quarter EPS of $0.94 was $0.13 lower than analyst forecasts, while revenues of $575.51 million also missed the mark by $78.5 million. This month the company’s Board approved repurchase of an additional $500 million worth of shares taking the total to $1 billion. The program is to be executed through the end of 2018. Anchorage Advisors, which is led by Kevin Michael Ulrich and Anthony Davis tops our list of Houghton Mifflin Harcourt Co (NASDAQ:HMHC)’s stockholders as it held more than 20 million shares of the company at the end of June.

#2 Tata Motors Limited (ADR) (NYSE:TTM)

Shares held (as of September 30): 1.12 million

Total Value (as of September 30): $25.54 million

Percent of Portfolio (as of September 30): 5.84%

Segantii initiated a position in Tata Motors Limited (ADR) (NYSE:TTM) during the second quarter and significantly boosted it during the third by adding some 946,000 shares. Although the stock price hit a multi-year low recently, it has been appreciating steadily since October. The company has been feeling the adverse effects from a slowing Chinese automobile market. It incurred a net loss of 4.3 billion rupees ($64 million) in the September quarter, which was worse than what analysts expected. Fisher Asset Management, led by billionaire Ken Fisher, held about 8.12 million shares of Tata Motors Limited (ADR) (NYSE:TTM) at the end of the third quarter.

#1 HSBC Holdings plc (ADR) (NYSE:HSBC)

Shares held (as of September 30): 1.42 million

Total Value (as of September 30): $52.99 million

Percent of Portfolio (as of September 30): 12.12%

The $154.74 billion banking and financial services company is another one of Segantii’s holding that has been sliding so far this year, but the fund perceived this as a buying opportunity and added some 1.14 million shares of HSBC Holdings plc (ADR) (NYSE:HSBC) during the July-September quarter. The Europe’s largest lender beat pre-tax profit forecasts for the third quarter by $6.1 billion on that front, an increase of $0.9 billion from estimates and also marked a 32% jump from the same quarter last year. Revenues of $14 billion were, however, 4% lower than a year ago, primarily due to lower wealth management sales in Hong Kong in light of the correction in the Chinese stock market. Fisher Asset Management held nearly 11.46 million shares of HSBC Holdings plc (ADR) (NYSE:HSBC) at June end.

Disclosure: None