Though Alan Howard‘s Brevan Howard is among the largest macro hedge funds in the world, its U.S equity portfolio has historically represented just a fraction of its total assets under management and its top equity holdings in the U.S have mostly been Latin American stocks trading on U.S exchanges. The fund’s recently submitted 13F filing with the Securities and Exchange Commission stands as further testament to that. According to the filing, Brevan Howard’s U.S equity portfolio at the end of December contained only $198.07 million in equities, whereas the fund manages around $25 billion of investors’ money as of November 2015. However, this tradition of the fund to limit its exposure to U.S equities turned out to be a blessing in 2015. Our analysis of Brevan Howard’s 13F holdings in companies worth over $1 billion shows that the handful of long positions held by the fund during 2015 delivered a weighted average returns loss of 3.4% for the year. In comparison, Brevan Howard’s flagship Master Fund, which boasts assets under management of $20 billion, was down by only 0.8% for 2015. In this post, we are going to analyze the fund’s top five stock picks at the end of the fourth quarter.
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. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas (see the details here).
#5 Cresud S.A.C.I.F. y A. (ADR) (NASDAQ:CRESY)
– Shares Owned by Brevan Howard (as of December 31): 1.35 million
– Value of Holding (as of December 31): $17.47 million
Amid a 32% rise in Cresud S.A.C.I.F. y A. (ADR) (NASDAQ:CRESY)’s stock during the fourth quarter, Brevan Howard increased its stake in the company by 26%. Shares of Cresud S.A.C.I.F. y A. tested the $10 mark again this year, but have fallen back from there and now trade with year-to-date losses of 16%. Most analysts share a favorable outlook on the company because the recently elected government in Argentina has taken several steps towards liberalizing its agricultural sector and the company stands to benefit from it in a major way. However, some analysts are concerned that IRSA, in which Cresud S.A.C.I.F. y A. (ADR) (NASDAQ:CRESY) owns a 64% stake and which is in great shape on a standalone basis, recently acquired an over 80% stake in IDB Development, an Israeli company that is in a financial mess. Ari Zweiman‘s 683 Capital Partners also increased its stake in Cresud S.A.C.I.F. y A. during the fourth quarter, by 45% to 932,450 shares.
#4 Ternium SA (ADR) (NYSE:TX)
– Shares Owned by Brevan Howard (as of December 31): 1.46 million
– Value of Holding (as of December 31): $18.12 million
Though Latin American steel producer Ternium SA (ADR) (NYSE:TX) has lost more than half of its market capitalization since the start of 2014, its stock is performing really well in 2016, up by over 12% year-to-date. Considering the stock’s performance, it seems Brevan Howard made the right decision at the right time by increasing its stake in the company by 89% during the fourth quarter. Despite the rally that it has had, Ternium SA (ADR) (NYSE:TX) shares still sport an attractive annual dividend yield of 6.43%. On February 23, the company reported an EPS loss of $0.64 on revenue of $1.81 billion for the fourth quarter, missing analyst’s expectations on both the top and bottom line. On February 24, analysts at Citigroup Inc. upgraded the stock to ‘Buy’ from ‘Neutral’, while keeping their price target on it unchanged at $21. Jim Simons‘ Renaissance Technologies more than doubled its stake in the company to 619,300 shares during the fourth quarter.