By looking at the 20% appreciation in the stock of billionaire Jacob Rothschild‘s RIT Capital Partners (it’s listed on the London Stock Exchange under ticker RCP), it seems that the investment trust performed well in 2015. However, according to our analysis, the 11 long positions RIT Capital Partners held in US-listed companies with a market capitalization of over $1 billion delivered a weighted average loss of 10.7% for the year. As its recently submitted 13F filing revealed, RIT Capital reduced its stake in eight of its 10 holdings during the fourth quarter and closed three positions. According to the filing, RIT Capital Partners’ US equity portfolio at the end of December was worth $372.1 million, 13% lower over the quarter. Let us proceed to the five stocks, which RIT Capital Partners was betting on going into 2016.
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 Monsanto Company (NYSE:MON)
Shares Owned by RIT Capital Partners (as of December 31): 360,000
Value of Holding (as of December 31): $35.47 million
Monsanto Company (NYSE:MON) was the only company among RIT Capital Partners’ seven largest holdings in which the fund increased its stake by 86% during the fourth quarter. Due to the slump in the agriculture commodity prices, shares of Monsanto Company (NYSE:MON) declined swiftly in the period between February and September of 2015 and although they bounced back during the fourth quarter, they have given up pretty much all of those gains this year by losing around 10%. On February 9, as part of an agreement with the SEC, the company agreed to pay $80 million in fines to settle charges against it of violating accounting rules and misstating earnings concerning its Roundup herbicide. The 24 prominent analysts and brokerages who cover the stock currently have an average rating of ‘Overweight’ with an average price target of $29.73. Larry Robbins‘ Glenview Capital inched up its stake in the company by 4% to 14.08 million shares during the fourth quarter.
#4 Walt Disney Co (NYSE:DIS)
Shares Owned by RIT Capital Partners (as of December 31): 481,800
Value of Holding (as of December 31): $50.62 million
RIT Capital Partners trimmed its stake in Walt Disney Co (NYSE:DIS) by 5% during the fourth quarter. Shares of the entertainment and media giant have been declining in the last couple of months and currently trade down by 9.6% year-to-date. This decline has pushed the stock’s dividend yield to nearly 1.5%, but some analysts believe that despite the depreciation, the stock is still overvalued since it trades at an enterprise value to free cash flow (EV/FCF) of 24, while its free cash flow growth has been only 11.5% in the last quarter. On February 18, analysts at Deutsche Bank reiterated their ‘Hold’ rating on the stock, but lowered their price target to $113 from $114. Ric Dillon‘s Diamond Hill Capital reduced its stake in the company by 10% to 1.94 million shares during the fourth quarter.