Mohnish Pabrai’s Dalal Street has acquired more shares of Horsehead Holding Corp. (NASDAQ:ZINC). In a Form 4 filing with the SEC, Dalal Street has disclosed purchases during the period of July 24 to July 28 of 470,653 shares in the manufacturer of zinc metal, at prices ranging from $7.82 to $8.12. After these transactions, Dalal Street holds an ownership stake of 7.48 million shares in Horsehead. The investment management firm acquired more shares of the company earlier this month, which might serve as an indicator that something good is expected to occur at Horsehead.
Dalal Street LLC is a value-driven hedge fund established by reputable investor Mohnish Pabrai in 1998. Dalal Street, where Pabrai currently acts as the managing partner, was launched with $1 million in assets under management and currently manages over $800 million in regulatory assets under management. The investing approach of Pabrai is believed to very much resemble Warren Buffett’s investing style. Unlike many of his peers in the industry who use mathematical models and gather massive amounts of data and information to make their investments, Pabrai takes on a particularly minimalist approach to stock investing. He is trying to stick to his circle of competence and aims at holding a concentrated portfolio of stocks in the businesses he understands. Dalal Street’s most recent 13F filing with the SEC reveals that the fund’s portfolio consists of only seven securities, which supports the idea that Pabrai prefers to invest in the businesses he understands and wait for returns rather than buy in and out of a high number of stocks. This gives the picks he does make great significance. The same filing indicates that Dalal Street manages a public equity portfolio worth $535.88 million.
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In the eyes of most traders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are more than 8,000 funds in operation at present, hedge fund experts at Insider Monkey look at the aristocrats of this group, around 700 funds. Contrary to popular belief Insider Monkey’s research revealed that hedge funds underperformed in recent years because of their short positions as well as the huge fees that they charge. Hedge funds managed to outperform the market on the long side of their portfolio. In fact, the 15 most popular small-cap stocks among hedge funds returned 123% since the end of August 2012 and beat the S&P 500 Index by 66 percentage points (see the details here). This is a huge margin which is why hedge funds’ recent Horsehead Holding Corp. purchases is a strong indicator.
Horsehead Holding Corp. (NASDAQ:ZINC) is the parent company of Horsehead Corporation, which is the largest zinc producer in the United States and the leading manufacturer of value-added zinc products, which include zinc oxide and zinc powder. Horsehead Holding Corporation is also the parent company of International Metals Reclamation Company LLC, a leading recycler of metals-bearing wastes and a leading processor of nickel-cadmium batteries in North America; and Zochem Inc., a zinc oxide producer located in Brampton, Ontario. Horsehead Holding Corp. has seven facilities across the United States and Canada. The shares of Horsehead have dropped by over 48% since the beginning of the current year, mainly caused by reduced production as a result of various ramp-up issues at the Mooresboro, North Carolina facility. In this article we’ll discuss some updates on how the company has been attempting to solve its issues at the abovementioned facility.
Earlier this month, Horsehead Holding Corporation issued an update on its operations at its Mooresboro zinc production facility. The company reported that this facility produced roughly 3,700 tons of zinc metal in June, compared to 4,100 tons in May and 2,800 tons in April. Indeed, this suggests a decline in production compared to the production delivered in May, but it seems that the market reacted too negatively to this update. Horsehead clearly pinpointed that the production was slowed while implementing some improvements at the facility so as to remove the impurities from the system and increase the capacity. In addition to that, 2,600 of the 3,700 tons were produced since June 15, which suggests that the production in July is expected to leave the production figures reported in April, May, and June in the dust.
Horsehead also mentioned that it intends to work on additional upgrades by the end of the summer, which will yet again most likely affect production. However, the planned upgrades will not hold back the production forever. On the contrary, they will surely result in improved production in the upcoming quarters, which will in turn positively affect the financial results of the company. Having said that, it’s quite clear why Mohnish Pabrai’s Dalal Street has been picking up its stake in Horsehead Holding Corp. (NASDAQ:ZINC) as shares have fallen. The reputable value investor seems to be more focused on the long-term performance of the company rather than on its short-term issues.
Horsehead intends to release its financial report for the second quarter of 2015 on August 7, which will shed some new light on whether the company is moving in the right direction or not. Within our database, Jonathan Savitz’s Greywolf Capital Management is among the largest investors in Horsehead Holding Corp. (NASDAQ:ZINC), with 3.63 million shares.
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