Soroban Capital: Performance, Strategy, AUM and Partners

If you are following investors and still haven’t heard about Eric W. Mandelblatt, you might want to change that. Eric W. Mandelblatt, who runs Soroban Capital Partners, will be one of the best investors in the next decade. At least that’s what Stan Druckenmiller, a legendary investor of our time considers. During an interview with CNBC‘s Kelly Evans in 2015, Druckenmiller singled out three “young lions”, Druckenmiller’s alumnus Zach Schreiber of PointState Capital, Tiger Cub Chase Coleman of Tiger Global Management, and Mandelblatt, all three of which, Druckenmiller believes will be considered legends in the next 15 or 20 years.

In 1998, Mandelblatt joined Goldman Sachs, right after graduating from the University of Florida with a BS in Accounting and a Certificate of Completion of a BA in Finance. At Goldman Sachs, he worked as an equity research analyst in the Investment Research Department, where he covered natural gas pipeline and distribution companies and Master Limited Partnerships. In 2002, Mandelblatt became an analyst/investor at Goldman Sachs Principal Strategies Group and two years later was promoted to Chief Operating Officer of the US Principal Strategies business. In 2005, Mandelblatt left Goldman Sachs to co-found a hedge fund, TPG-Axon Management, with Dinakar Singh.

In January 2010, TPG-Axon merged with London-based Montrica Investment Management, but several months earlier, Mandelblatt left his fund to create Soroban Capital Partners. In October, Mandelblatt launched Soroban together with Gaurav Kapadia, who had also been a partner at TPG-Axon, and Scott Friedman, TPG-Axon’s head trader. In addition, Mandelblatt hired Vito Tanzi, former Kalix Advisors CFO, who is currently a partner at Soroban, as well as its CFO and COO. The fund also employs, Steve Thomas, the former Head of Business Development and Investor Relations of Highbridge Capital Management, who is a partner and Head of Investor Relations. All partners where at the fund from the beginning and invested their own money in the fund.

Currently, Soroban Capital Partners has over $11 billion in regulatory assets under management, according to a regulatory filing. The fund makes long and short investments in a variety of securities, including stocks, equity and sector indices, commodities, credit, and currencies. It focuses on companies with a catalyst for a change in earnings/cash flow or valuation and industries and transformation.

Even though most of Soroban’s investments are passive, the fund also had several activist positions. One of the most widely covered was its bet on Williams Companies Inc (NYSE:WMB). In 2014, Soroban Partners joined forces with Keith Meister’s Corvex Management, another activist, and agreed to coordinate their efforts regarding the company. The same year, Williams Companies Inc (NYSE:WMB) reached an agreement with both funds and appointed Messrs. Mandelblatt and Meister to its board of directors.

Both investors kept to press the company to improve shareholder value and tried to ouster CEO Alan S. Armstrong. They both played a key role in pushing for the merger between Williams and Energy Transfer Partners, but the deal fell through in 2016. After that half of Williams’ board resigned following a failed vote to oust the CEO and a day later, Mandelblatt and Meister quit as well, with Mandelblatt saying in a letter: ““I cannot serve on a board that continues to empower a C.E.O. with an abysmal operational and financial track record, and who in my opinion lacks the necessary judgment and character to lead the company forward.” Soroban liquidated its position in Williams Companies by the end of 2016.

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Another reason to follow Soroban Capital Partners is that its picks on average outperform the market. For example, in the first six months of 2017, the fund’s long positions in companies worth over $1.0 billion posted a weighted average return of 13.9%, according to our calculations. This return beat the S&P 500 by more than five percentage points. Over the 12-month period between June 2016 and 2017, Soroban’s picks returned over 43%. We follow Soroban alongside more than 600 other funds and offer our readers the possibility to follow these funds closely and receive alerts whenever they disclose updates to their portfolios via 13D and 13G filings with the Securities and Exchange Commission. To receive these real-time alerts, you should sign up on Insider Monkey and add Soroban (or any other fund in our database) to your follow list.

In its latest 13F filing, Soroban Capital disclosed an equity portfolio worth $25.68 billion, with consumer and tech stocks amassing the largest shares. On the following pages, we will take a look at some of the top holdings in Soroban’s equity portfolio, as well as companies in which the fund initiated stakes between April and June.

1. NXP Semiconductors NV (NASDAQ:NXPI)

In NXP Semiconductors NV (NASDAQ:NXPI), Soroban Capital Partners boosted its position by 71% during the second quarter, having amassed 16.68 million shares worth $1.83 billion at the end of June. NXP Semiconductors NV (NASDAQ:NXPI) is currently in the process of being acquired by QUALCOMM, Inc. (NASDAQ:QCOM) in a $38 billion deal, but earlier this year, a number of activist investors including Paul Singer’s Elliott Management, asked NXP Semiconductors NV (NASDAQ:NXPI) to seek renegotiation of the deal in order to raise the bid. In June, Morgan Stanley analyst Craig Hettenbach said that Qualcomm can raise its bid by up to 10% “with minimal impact to its balance sheet ad deal accretion.” Recently, EU antitrust regulators have halted their review of the deal for the second time. There were 74 investors in our database long NXP Semiconductors NV (NASDAQ:NXPI) at the end of June, down by three over the quarter.

2. Anheuser Busch Inbev NV (ADR) (NYSE:BUD)

Anheuser Busch Inbev NV (ADR) (NYSE:BUD) saw Eric Mandelblatt’s fund increase its stae by 10% between April and June. The fund disclosed a $1.52 billion holding, which contained 13.81 million shares, in its latest 13F filing. Since the beginning of the year, Anheuser Busch Inbev NV (ADR) (NYSE:BUD)’s stock has gained over 13%, boosted by two positive financial reports. For the second quarter, the beer maker, which has over 200 brands in its portfolio, posted EPS of $1.06, better than the expected $0.97 and revenue of $14.18 billion, which was in line with estimates, but grew by 31.2% on the year. Aside from Soroban, 27 other investors held shares of Anheuser Busch Inbev NV (ADR) (NYSE:BUD) at the end of June, down by one over the quarter.

3. Praxair, Inc. (NYSE:PX)

Soroban Capital Partners also added 2.75 million shares to its stake in Praxair, Inc. (NYSE:PX) during the second quarter, taking it to 8.49 million shares worth $1.13 billion. Praxair, Inc. (NYSE:PX) is another company currently in the process of a merger. At the end of 2016, Praxair, Inc. (NYSE:PX) and German-based industrial gases group Linde agreed on a merger of equals. The deal worth $70 billion will create the world’s largest industrial gases group, but it has faced some antitrust hurdles. Both companies have said that they would consider selling some assets and some potential buyers have expressed interest. At the end of June, there were 39 investors in our database holding $4.08 billion worth of stock, which represented nearly 11% of the company’s stock.

4. MGM Resorts International (NYSE:MGM)

MGM Resorts International (NYSE:MGM) is a new company in Soroban’s equity portfolio, as the fund added 16.72 million shares worth $523.30 million during the second quarter. Last month, MGM Resorts International (NYSE:MGM)’s T-Mobile Arena in Las Vegas hosted the historical boxing match between UFC star Conor McGregor and boxer Floyd Mayweather. The event is expected to boost the company’s earnings, which last quarter disappointed the market on the back of weak revenue from China. The company posted EPS of $0.27 and revenue of $2.64 billion, which missed the consensus estimates by $0.03 and $30 million, respectively. The number of funds from our database long MGM Resorts International (NYSE:MGM) declined by nine to 54 during the second quarter.

5. Alphabet Inc (NASDAQ:GOOG)

In Alphabet Inc (NASDAQ:GOOG), Soroban Capital also acquired a new position that contained 342,468 class C shares valued at $311.21 million at the end of June. Alphabet Inc (NASDAQ:GOOG)’s stock has advanced by over 20% since the beginning of the year, on the back of strong results, despite a $2.7 billion fine that the EU antitrust regulators slapped on the company’s Google unit in June. Alphabet Inc (NASDAQ:GOOG)’s still remains a great stock to own for long-term gains, as the company’s revenue growth remains solid and the company has plenty of resources to invest in a variety of projects. At the end of June, 127 funds tracked by Insider Monkey held class C shares of Alphabet Inc (NASDAQ:GOOG), up by 10 over the quarter.

Disclosure: none