These Are Intermede Partners’ Top Stock Picks Following Buying Spree

Intermede Investment Partners is a London-based hedge fund that focuses on a single strategy – global equity. The fund was founded by Barry Dargan in 2013 and started managing client money in October 2014, following its joint venture with National Australia Bank in April 2014. Mr. Dargan is a Chartered Accountant and prior to founding Intermede Investment Partners served as a Partner, Managing Director and Portfolio Manager at Artisan Partners. Intermede Investment Partners has submitted its 13F filing with the Securities and Exchange Commission (SEC), revealing a US equity portfolio worth $830.15 million at the end of March. The filing showed that Intermede Investment Partners went on a major buying spree during the first three months of 2016 by initiating a stake in four stocks and increasing its holdings in 23 companies. Though the fund sold off its entire positions in three stocks during the first quarter, it didn’t reduce its holding in any of the stocks it held at the end of 2015. In this post, we will take a look at Intermede Investment Partners’ top five stock picks going into the second quarter, which in aggregate accounted for 27.55% of the value of its equity portfolio at the end of March.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

#5 TJX Companies Inc (NYSE:TJX)

– Shares Owned by Intermede Investment Partners (as of March 31): 500,266

– Value of Holding (as of March 31): $39.2 million

Let’s start with TJX Companies Inc (NYSE:TJX), in which Intermede Investment Partners increased its stake by 49% during the first quarter. The apparel and home furnishing behemoth has been one of the best-performing stock in the retail universe for quite some time now, generating returns of over 200% in the past five years inclusive of dividends. This year, the stock reached its lifetime high of $79.20 in April and is currently trading up by 3% year-to-date. The company recently increased its quarterly dividend to $0.26 per share from $0.21, which at its current stock price represents an annual dividend yield of 1.43%. However, some of the analysts who track TJX Companies Inc (NYSE:TJX) feel that the stock is fully valued at current levels and has more downside risk, they advise against shorting it. According to them, the fundamentals of the company are solid and investors should rather think about accumulating the stock if it corrects from the current levels. On March 14, analysts at Cowen and Company reiterated their ‘Outperform’ rating on the stock, while upping their price target to $87 from $85. David Keidan‘s Buckingham Capital Management also increased its stake in the company during the first quarter by 65% to 191,495 shares.

#4 Mastercard Inc (NYSE:MA)

– Shares Owned by Intermede Investment Partners (as of March 31): 446,054

– Value of Holding (as of March 31): $42.15 million

After a multi-year rally that resulted in its stock appreciating by over 500% Mastercard Inc (NYSE:MA) finally took a breather at the start of 2016, which provided several investors including Intermede Investment Partners an opportunity to initiate or up their stakes in the company. During the first quarter, the fund increased its holding in the payment solutions provider by 41%. On April 28, the company reported its fiscal 2016 first-quarter numbers, declaring EPS of $0.86 on revenue of $2.45 billion for the quarter versus analysts’ expectations of EPS of $0.85 on revenue of $2.38 billion. Along with the earnings, the company also revealed that it bought back 15 million shares during the first quarter for $1.4 billion and so far in the second quarter it has bought back 3 million more shares at a cost of nearly $288 million. Accounting for these buybacks, Mastercard Inc (NYSE:MA) has still $2.9 billion left under its current repurchase program authorization. Following the earnings release, on the same day, analysts at Keefe, Bruyette & Woods reiterated their ‘Buy’ rating on the stock. Among the hedge funds that reduced their stakes in Mastercard Inc  during the first quarter was Murray Stahl‘s Horizon Asset Management, which brought its holding down by 10% to 90,656 shares.

#3 ANSYS, Inc. (NASDAQ:ANSS)

– Shares Owned by Intermede Investment Partners (as of March 31): 499,990

– Value of Holding (as of March 31): $44.73 million

Moving on, Intermede Investment Partners  increased its stake in ANSYS, Inc. (NASDAQ:ANSS) by 42% during the quarter ending March 31. Shares of the engineering simulation software maker have been trading in a range for the past one year and have lost over 7% year-to-date. However, most analysts are optimistic about the long-term prospects of the company, citing the niche sector that the company operates in and the competitive advantages it enjoys over its peers. ANSYS, Inc. (NASDAQ:ANSS) posted a net income of $0.77 per share on revenue of $225.90 million for the first quarter, compared to analysts’ projections of EPS of $0.76 on revenue of $228.51 million. For the same quarter of the previous year, the company had reported EPS of $0.77 on revenue of $218.37 million. On March 15, analysts at Berenberg Bank reiterated their ‘Hold’ rating and $94 price target on ANSYS, Inc. (NASDAQ:ANSS)’s stock. Billionaire Ken Fisher‘s Fisher Asset Management also increased its stake in the company during the January-March period, by 10% to 46,506 shares.

#2 Comcast Corporation (NASDAQ:CMCSA)

– Shares Owned by Intermede Investment Partners (as of March 31): 837,342

– Value of Holding (as of March 31): $51.14 million

Comcast Corporation (NASDAQ:CMCSA) is the only stock in this list in which Intermede Investment Partners raised its stake by less than 40% during the first quarter. Despite the fund increasing its stake in the company by 20% during that period, Comcast Corporation (NASDAQ:CMCSA) lost its spot as Intermede Investment Partners’ top stock pick at the end of first quarter. Shares of the media and technology giant have seen a gradual rise since mid-January this year due to which they are currently trading up almost 10% year-to-date. On April 27, the company reported mixed numbers for its fiscal 2016 first quarter. While it managed to beat Street’s EPS expectations of $0.79 by declaring EPS of $0.84 for the quarter, the revenue of $17.85 billion it reported was well below analysts’ estimate of $18.68 billion. On April 29, Comcast Corporation announced that it will be acquiring  Dreamworks Animation Skg Inc (NASDAQ:DWA) for $3.8 billion or $41 per share in an all-cash deal. Some analysts believe that Comcast Corporation is overpaying for this deal because Dreamworks Animation Skg Inc (NASDAQ:DWA)’s business has been on a continuous decline over the past few years and the prospects of a turnaround are dim. Eric Sprott‘s Sprott Asset Management reduced its stake in Comcast Corporation by 35% to 56,400 shares during the first quarter.

#1 Alphabet Inc (NASDAQ:GOOG)

– Shares Owned by Intermede Investment Partners (as of March 31): 69,079

– Value of Holding (as of March 31): $51.46 million

Finally, Alphabet Inc (NASDAQ:GOOG) was another stock in which Intermede Investment Partners increased its stake by 42% during the first quarter. Alphabet Inc (NASDAQ:GOOG)’s stock is currently trading down over 10% year-to-date owing largely to the decline it has seen recently after the company came out with its first quarter numbers. While the Street had expected the company to report EPS of $7.96 on revenue of $20.37 billion for the quarter, Alphabec declared EPS of $7.50 on revenue of $20.26 billion. Among the reasons why Alphabet missed the expectations are higher traffic acquisition costs for its Google segment, an operating loss of $802 million in its Other Bets segment and weakness of other currencies versus the US dollar during the quarter. Despite the lower-than-expected first-quarter results, most analysts continue to remain bullish on Alphabet. On April 24, analysts at RBC Capital reiterated their ‘Outperform’ rating and $1,000 price target on the stock. Sandy Nairn‘s Edinburgh Partners reduced its stake in the company marginally during the first quarter, by 4% to 74,122 shares.

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