Chanos, Simons Among the Billionaires Betting on This Infrastructure Giant

RENAISSANCE TECHNOLOGIESIn July, Chicago Bridge and Iron Company N.V. (NYSE:CBI) announced plans to acquire Shaw Group Inc. (NYSE:SHAW) at $46 per share. Chicago saw an over 15% drop in its shares on the Shaw acquisition news. On the other hand, shares of Shaw were up over 50%. The acquisition price for Shaw is $46, while the company is currently trading at less than $44 a share.

At the end of 2Q, both companies had serious billionaire fund managers as shareholders—including the likes of D.E. Shaw, Steven Cohen, Jim Chanos and Jim Simons. We believe these managers were bullish on what these companies could do separately, but are aggressively bullish on what they can accomplish together. The Shaw acquisition will give Chicago more of a presence in the energy sector, while favorable petrochemical prospects will continue to drive its core business.

Shaw has plans to ramp up its nuclear projects in 2013. The company has seen margins contract on cost overruns on nuclear and coal projects. As well, the company is finalizing the sale of its energy and chemicals unit, while also completing the sale of its 20% stake in Westinghouse—back to Toshiba—which will eliminate all of its $1.7 billion debt.

Prior to the acquisition offer, Shaw was down year to date 15%, having had a couple huge earnings misses. August 2011 earnings miss came in at 176%, posting actual EPS of negative $0.44 versus estimates of $0.58. Then in May 2012, the company missed EPS again, posting negative $0.09 EPS versus estimates of $0.58.

Chicago is expected to see a revenue increase of 23% in 2012, and continued strengthening into 2013. Chicago also boasts a backlog of $28 billion—which is expected to put next year EPS up 18%. Some of the biggest competitors for the potential Shaw-Chicago conglomerate will be KBR, Inc. (NYSE:KBR), Jacobs Engineering Group Inc (NYSE:JEC) and Fluor Corporation (NYSE:FLR).

KBR reported 2Q net income of $104 million or $0.70 per share compared to net income of $100 million or $0.65 per share in the second quarter of 2011. Earnings next year are expected to come in 18% higher. KBR has announced a couple key contracts with the likes of DuPont and Dominion Resources, and is up 7% year to date. The company also upped its earnings guidance for the year 2012, calling for EPS of $2.60 to $2.80, previous estimates were $2.45 to $2.80.

Jacobs, seeing strength in its upstream oil and gas, and chemicals sectors, expects EPS to come in up at an estimated 13% higher next year. Backlogs have rose 11% to $15.6 billion from a year ago. Fluor is the powerhouse of the industry, with a market cap of around $9 billion. Fluor is expected to see a 20% increase in 2012 revenues, with its oil and gas segment being the driving force. The company is also expected to see a positive an increase in revenue mix, with a solid backlog in the chemical segment.

Fluor saw Carlson Capital increase its position by 62% in 2Q, while Jacobs and KBR saw common interest from notable firms Royce & Associates and Platinum Asset Management. Platinum was the top fund owner by shares in Jacobs, while also upping its stake in KBR by 23% over the quarter. The second largest owner of Jacobs by shares was Royce & Associates, who also owned 1.7 million shares of KBR. Worth noting for KBR is the recent insider sale by the company’s CEO.

The top five fund owners were all upping their stakes in Shaw during 2Q, most notably D.E. Shaw and Steven Cohen, by 41% and 318% respectively. For Chicago, Jim Chanos and Jim Simons were modest owners, while Columbus Circle Investors was the top fund owner, with 3.1 million shares invested. Click here to see all funds owning Shaw and all funds owning Chicago. Each of these engineering and construction firms have top fund managers owning a piece of the action, but we believe that a Chicago-Shaw combo could be the most impressive powerhouse of the bunch.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!