Steven Tananbaum Added These 5 Stocks to GoldenTree’s Portfolio in Q1

Steven Tananbaum has earned a reputation as a maverick investor by betting on bonds of companies that are in trouble. However, few people know that his hedge fund GoldenTree Asset Management also invests in equities, albeit on a very small scale. According to GoldenTree Asset Management’s latest 13F filing, its US equity portfolio was worth $410.37 million at the end of March, which was only 1.7% of the $24 billion in assets that the fund currently manages. The filing also revealed that GoldenTree’s portfolio consisted of only 19 stocks and that its top ten equity holdings amassed over 90% of the value of its portfolio at the end of the first quarter. In this article, we will take a look at the five equities added to the portfolio of Mr. Tananbaum’s fund and try to uncover why he might be bullish on them.

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#5 KKR & Co. L.P. (NYSE:KKR)

 – Shares Owned by GoldenTree Asset Management (as of March 31): 130,723

 – Value of Holding (as of March 31): $1.92 million

Let’s start with KKR & Co. L.P. (NYSE:KKR), which in terms of value was GoldenTree’s smallest equity position at the end of the first quarter. Shares of the private equity giant have fallen by over 40% in the past 12 months, with nearly 12.5% of those declines coming this year. The large decline has significantly boosted the company’s annual dividend yield, which now stands very close to 8%. In March, the company’s recently-issued preferred stock started trading on the New York Stock Exchange under the symbol ‘KKR-A’. Since its debut, the preferred stock has appreciated by over 3%. Legendary short seller Jim Chanos‘ Kynikos also initiated a stake in KKR & Co. L.P. (NYSE:KKR) during the first quarter; it purchased 326,958 shares of the company.

#4 CDW Corp (NASDAQ:CDW)

 – Shares Owned by GoldenTree Asset Management (as of March 31): 180,512

 – Value of Holding (as of March 31): $7.5 million

CDW Corp (NASDAQ:CDW)’s stock has been on a long-term uptrend ever since the information technology company made its stock market debut in June 2013. Though it is currently trading down marginally in 2016, it has appreciated by over 150% since it was first listed. On May 4, the company reported its first quarter results, declaring EPS of $0.67 on revenue of $3.10 billion, topping the EPS of $0.56 and revenue of $2.76 billion that it pulled in for the same quarter of last year. On May 19, analysts at RBC Capital reiterated their ‘Buy’ rating and $46 price target on the stock, which represents potential upside of 7.8%. Hedge funds that reduced their stakes in the company during the first quarter included billionaire Israel Englander‘s Millennium Management, which brought its holding down by 35% to just under 800,000 shares.

The top three additions to GoldenTree’s equity portfolio are uncovered on the next page.

#3 Pinnacle Entertainment, Inc. Common Stock (NASDAQ:PNK)

 – Shares Owned by GoldenTree Asset Management (as of March 31): 233,612

 – Value of Holding (as of March 31): $8.2 million

Following its merger with Gaming and Leisure Properties, Inc., Pinnacle Entertainment, Inc. Common Stock (NASDAQ:PNK) recently announced the spin-off of its operating assets into a separate publicly-traded company. Most analysts appreciated this move to separate the company’s real estate and operating units into two different entities, believing that it will help to unlock shareholder value. On May 10, the company reported its first quarter results, including EPS of $0.83 and revenue of $580 million, which beat analysts’ expectations of $0.64 in EPS on revenue of $577 million. Following the earnings release, analysts at Telsey Advisory Group upgraded the stock to ‘Outperform’ from ‘Market Perform’ on May 11, but lowered their price target on it to $19 from $31. Parag Vora‘s HG Vora Capital Management reduced its stake in Pinnacle Entertainment, Inc. Common Stock (NASDAQ:PNK) by 19% to 4.75 million shares during the first quarter.

#2 Ally Financial Inc (NYSE:ALLY)

 – Shares Owned by GoldenTree Asset Management (as of March 31): 690,895

 – Value of Holding (as of March 31): $12.93 million

Moving on, shares of bank holding company Ally Financial Inc (NYSE:ALLY) have enjoyed a strong rally since May 20, appreciating by over 6% to wipe out half of their year-to-date losses. The company announced its first quarter financial figures in April, which were well below analysts’ estimates. Since then, there has not been any major news regarding the company, so it appears the stock was gaining ground largely on the back of rate hopes, which were somewhat dashed on Friday following a weak US jobs report, causing shares to give up 4.4%. The stock currently sports an average rating of ‘Buy’ and an average price target of $24.78 from the 19 leading analysts and research firms on Wall Street that cover it. Stephen Feinberg‘s Cerberus Capital Management didn’t make any changes to its stake of 41.52 million shares of Ally Financial Inc (NYSE:ALLY) during the first quarter and continued to remain its largest shareholder among the funds in our system.

#1 Realogy Holdings Corp (NYSE:RLGY)

 – Shares Owned by GoldenTree Asset Management (as of March 31): 722,160

 – Value of Holding (as of March 31): $26.08 million

Realogy Holdings Corp (NYSE:RLGY) was GoldenTree Asset Management’s sixth-largest equity holding at the end of first quarter and its top new stock pick. Though Realogy Holdings Corp (NYSE:RLGY)’s stock ended the first quarter with a loss of only 1.5%, it is currently trading down by more that 10% year-to-date due to the large decline it saw in early-May when the company reported its first quarter numbers. While analysts were expecting the real estate services company to report a loss of $0.11 per share on revenue of $1.13 billion for the quarter, it declared a loss of $0.12 per share on revenue of $1.13 billion. In its latest 13F filing, Richard McGuire-led activist hedge fund Marcato Capital Management revealed having initiated a stake in Realogy Holdings Corp during the first quarter, purchasing 722,160 shares of the company.

Disclosure: None