A Look at Top 13F Picks of One of the Best-Performing Hedge Funds of 2015

2015 was the most volatile year for the Chinese equity markets in almost a decade. In the period between February and July, the Shanghai Composite rallied by over 60%, only to lose all of those gains in the next few months. Though this extreme movement in Chinese equities rattled most investors who primarily invest in the Asia-Pacific region, there were a few hedge funds which used this volatile period to deliver superior returns for their investors. Among them was Simon Sadler’s Segantii Capital, a Hong Kong-based long/short equity hedge fund. According to Bloomberg’s recently released list of the best performing hedge funds of 2015, Segantii Capital’s flagship fund, Segantii Asia-Pacific Equity Multi Strategy, ended 2015 with gains of 29.7%. However, Insider Monkey’s analysis of Segantii Capital’s 13F holdings in companies worth over $1 billion shows that the 113 long positions held by the fund in companies with market caps above $1.0 billion delivered a weighted average loss of 10.7% in 2015. This discrepancy is mainlt because we don’t include a fund’s investments  in other asset classes, its short positions or its investment in other markets apart from the US, while calculating its returns. Nonetheless, our estimate acts as a good measure of a fund’s stock-picking skills in US equities. Having said that, in this post we will be analyzing Segantii Capital’s top five equity holdings going into 2016 as revealed by its latest 13F Filing submitted with the SEC.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. Our researched showed that imitating 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 Anadarko Petroleum Corporation (NYSE:APC)

– Shares Owned by Segantii Capital (as of December 31): 403,594

– Value of Holding (as of December 31): $19.53 million

Anadarko Petroleum Corporation (NYSE:APC) was a new addition to Segantii Capital’s equity portfolio during the fourth quarter. The slump in crude oil prices has taken a heavy toll on Anadarko Petroleum Corporation (NYSE:APC)’s stock in the past few quarters. However, in anticipation of the company’s fourth quarter results it started moving up recently and currently trades down 21.7% year-to-date. While the company managed to soothe investors’ nerves by reporting a loss of $0.59 per share for the fourth quarter versus expectations of a per share loss of $1.09, its revenue at $2.05 billion was below the consensus estimate of $2.22 billion. On February 24, Anadarko Petroleum Corporation announced it has closed or signed agreements to sell approximately $1.3 billion of assets since the beginning of 2016, which analysts are seeing as a positive move considering the large amount of debt it has on its balance sheet. John Labanowski‘s Brenham Capital Management also initiated a stake in the company (by purchasing 1.4 million shares) during the fourth quarter.

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

– Shares Owned by Segantii Capital (as of December 31): 805,319

– Value of Holding (as of December 31): $23.81 million

Tata Motors Limited (ADR) (NYSE:TTM) is the only stock in this list in which Segantii Capital reduced its stake by 29% during the fourth quarter. After losing over 30% of its market capitalization last year, Tata Motors Limited (ADR) (NYSE:TTM)’s stock has slid by around 25% so far this year. However, these declines have made the stock extremely cheap at current levels as it trades at a forward price-to-earnings multiple of only 4.94. Though the growth of the auto manufacturer has been below par in its domestic market, analysts feel that as long as its luxury brands Jaguar and Land Rover continue to do well the shareholders of the company don’t need to worry. On February 16, analysts at Goldman Sachs upgraded the stock to ‘Neutral’ from ‘Sell’. Billionaire Cliff Asness‘ AQR Capital Management also reduced its stake in Tata Motors Limited by 26% to 3.4 million shares during the October-December period.

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

– Shares Owned by Segantii Capital (as of December 31): 1.74 million

– Value of Holding (as of December 31): $69.60 million

Amid a 4.2% rise in HSBC Holdings plc (ADR) (NYSE:HSBC)’s stock during the fourth quarter, Segantii Capital increased its stake in the bank holding company by 22%. This year HSBC Holdings plc (ADR) (NYSE:HSBC)’s stock has been on a gradual decline, losing over 18% of its value thus far. However, this decline has also helped in raising the stock’s annual dividend yield to nearly 8% currently. Though some investors are concerned whether HSBC can afford to continue paying dividends when most large banks have stopped paying dividends altogether to conserve capital, analysts think that the current dividend payout by the bank is sustainable at least in the medium-term. Due to the slowdown in Asia, HSBC Holdings recently has reported a loss of $1.3 billion for its fiscal fourth quarter versus a profit of $511 million it delivered in the same quarter of the previous year. However, despite a weak performance, the bank’s management said that it would maintain its dividend. Billionaire Ken Fisher‘s Fisher Asset Management trimmed its stake in HSBC by 1% to 11.4 million shares during the fourth quarter.

#2 ICICI Bank Ltd (ADR) (NYSE:IBN)

– Shares Owned by Segantii Capital (as of December 31): 8.87 million

– Value of Holding (as of December 31): $70.10 million

Moving on, Segantii Capital made an over fourfold increase in its stake in ICICI Bank Ltd (ADR) (NYSE:IBN) during the fourth quarter. One of the largest private sector banks in India, ICICI Bank Ltd (ADR) (NYSE:IBN)’s stock has lost more than half of value over the last 52 weeks amid concerns about the rising level of bad loans on its books. However, analysts who track the stock point out that, though these concerns are valid, investors’ have overreacted to the news, which is why the stock has suffered such a steep decline. The bank is expected to provide a detailed account of the bad loans it has identified when it reports results for its fiscal quarter ending March 31 and analysts believe it will help in dispelling some of the fears regarding the bad loans on its books. Joshua Friedman and Mitchell Julis‘ Canyon Capital Advisors reduced its stake in ICICI Bank Ltd by 19% to nearly 5.84 million shares during the fourth quarter.

#1 BHP Billiton Limited (ADR) (NYSE:BHP)

– Shares Owned by Segantii Capital (as of December 31): 2.8 million

– Value of Holding (as of December 31): $73.19 million

Despite its stock declining by 18.5% during the October-December period, Australian mining giant BHP Billiton Limited (ADR) (NYSE:BHP) became Segantii Capital’s top stock pick at the end of December after the fund made a sixfold increase in its stake during the fourth quarter. The slump in commodity prices continues to weigh heavily on BHP Billiton Limited (ADR) (NYSE:BHP)’s stock as it trades down over 12% year-to-date. The company recently has reported its first half-year loss in more than 16 years and along with it also announced a reduction of 74% in its interim dividend. Through cutting its dividend the company expects to save $6 billion this year, which, along with the $3.5 billion it intends to save by reducing its CAPEX and the $1 billion savings BHP will incur from reduced costs, will help it in having an additional $10 billion at its disposal by July 2017. The company intends to use this $10 billion for future M&A deals, which, according to the company’s management, are its top priority currently over internal projects. Billionaire Ray Dalio‘s Bridgewater Associates also increased its stake in BHP Billiton Limited by 31% to 417,111 shares during the fourth quarter.

Disclosure: None