William von Mueffling became a revered name on Wall Street in the late 90’s, when he held on to his conviction and shorted tech stocks aggressively during the tech bubble. While other well-known financial wizards of the time burned their hands trying to do the same thing, Mr. Mueffling generated phenomenal average annual returns of 30% in the period between 1998 and 2003 through his shorts. The famed fund manager is again displaying the same conviction, but this time around by holding on to his stock picks.
According to the latest 13F filing submitted by Mr. Mueffling’s hedge fund Cantillon Capital Management, the value of the fund’s public equity portfolio increased to $7.08 billion at the end of September from nearly $6 billion at the end of June. However, during the same period, the fund’s equity portfolio had a quarterly turnover of only 10.23% and its top equity holdings remained the same. Though Cantillon reduced its stake in most of its top stock picks during that time, the reduction at best can be described as marginal. In this article, we are going to take a look at Cantillon’s top five equity holdings entering the final quarter of 2016 and discuss their recent performance.
At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).
Alphabet Inc (NASDAQ:GOOGL)
– Shares Owned by Cantillon Capital Management (as of September 30): 471,001
– Value of the Holding (as of September 30): $378.71 Million
Cantillon Capital Management sold 1,960 shares of Alphabet Inc (NASDAQ:GOOGL) during the third quarter. The search giant has lost a considerable amount of its market cap since Mr. Trump was elected as the new President, pushing the stock down to marginal losses in 2016. On November 11, Alphabet Inc (NASDAQ:GOOGL) filed its official response to allegations made against its mobile OS, Android, by regulators in the European Union. Although the company has rejected all the antitrust charges against Android, if it is found guilty, EU regulators can impose a hefty fine on it and it could also see significant monetary damages due to the legal costs associated from the battle. Earlier this month, analysts at RBC Capital Markets reiterated their ‘Outperform’ rating and $1,025 price target on the stock, which suggests potential upside of 37.15%.
Willis Towers Watson PLC (NASDAQ:WLTW)
– Shares Owned by Cantillon Capital Management (as of September 30): 3.3 Million
– Value of the Holding (as of September 30): $437.18 Million
Willis Towers Watson PLC (NASDAQ:WLTW) was the only stock among Cantillon Capital Management’s top-10 equity holdings in which the fund increased its stake during the third quarter, by 12%. Cantillon initiated its stake in the company during the first quarter. Although Willis Towers Watson PLC (NASDAQ:WLTW)’s stock performed well after the fund initiated its stake, it has fallen heavily since the start of October and now trades down by 5.57% year-to-date. The company currently pays a quarterly dividend of $0.48 per share, which translates into a forward yield of 1.58%. For its third quarter, Willis Towers Watson reported dismal financial numbers, though that only led analysts at Jefferies Group to lower their price target on the stock ever so slightly, to $147 from $150 on November 8, while keeping their rating on it unchanged at ‘Buy’.
We’ll check out three more of the fund’s stock picks on the next page.