Famed Short Seller Jim Chanos’ Was Bullish On These Stocks in Q2

Kynikos, the New York-based hedge fund founded by revered short seller Jim Chanos, recently submitted its 13F filing with the SEC for the reporting period of June 30. Although the fund managed regulatory assets worth over $3 billion as of March 30, its latest filing reveals that its long U.S. equity portfolio contained positions worth less than 10% of those assets, being valued at $251.16 million at the end of June. The filing also revealed that during the second quarter, Kynikos’ long equity portfolio had a quarterly turnover rate of 47.14% and that its top-10 holdings accounted for over 58% of the value of its equity portfolio.

In this article, we’ll take a look at five bullish bets made by Jim Chanos and his team during the second quarter and discuss how these stocks have been performing of late.

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).

#5 FireEye Inc (NASDAQ:FEYE)

– Shares Owned by Kynikos (as of June 30): 246,898

– Value of Holding (as of June 30): $4.06 Million

FireEye Inc (NASDAQ:FEYE) was a new entrant to Kynikos’ long U.S. equity portfolio during the second quarter. The cybersecurity company has lost more than 60% of its market capitalization since last June and its stock is currently trading down by 30.57% in 2016. A large part of the stock’s decline over the past few quarters has been due to uncertainty regarding the company’s top-line results. Though FireEye has taken several measures to improve its profitability, including reducing its workforce, its revenue and cash flow projections continue to be dismal. For its most recent quarter, analysts had expected FireEye Inc (NASDAQ:FEYE) to report a loss of $0.39 per share on revenue of $181.76 million, whereas the company declared loss of $0.33 per share on revenue of $175 million. Following the earnings release, several analysts and research firms reduced their price targets on the stock, including analysts at Imperial Capital, who lowered their price target on FireEye to $15 from $25 on August 3, and also reduced their rating on the stock to ‘In-Line’ from ‘Outperform’. Billionaire Jim Simons‘ Renaissance Technologies made a two-fold increase to its stake in FireEye to 1.26 million shares during the second quarter.

#4 Starz (NASDAQ:STRZA)

– Shares Owned by Kynikos (as of June 30): 145,214

– Value of Holding (as of June 30): $4.34 Million

Starz (NASDAQ:STRZA) also made its debut in Kynikos’ portfolio during the second quarter. Like FireEye, Starz’ stock has also declined considerably from the levels it was trading at last summer. However, the decline in the stock has been fairly limited this year, as it currently trades with a year-to-date loss of 8%. Earlier this month, the media and entertainment company extended its deal with actor and rapper Curtis ’50 Cent’ Jackson, who serves as the executive producer of its flagship TV series ‘Power’. Starz (NASDAQ:STRZA) doesn’t pay any dividend to its investors, but its stock is trading at an attractive trailing P/E of 15.46, which is considerable lower than the average trailing P/E of its competitors. Several hedge funds covered by Insider Monkey initiated a stake in Starz during the second quarter, including Tim David‘s Guardian Point Capital, Jeffrey Bronchick’s Cove Street Capital, and Warren Buffett’s Berkshire Hathaway.

On the second page of this article we’ll check out three more stocks that Mr. Chanos is bullish on.

 #3 Johnson & Johnson (NYSE:JNJ)

– Shares Owned by Kynikos (as of June 30): 49,843

– Value of Holding (as of June 30): $6.05 Million

Johnson & Johnson (NYSE:JNJ) is the only stock covered in this article in which Kynikos had a stake prior to the start of the second quarter. The fund initiated its stake in the healthcare behemoth during the first quarter and upped it by 67% during the second quarter. Johnson & Johnson (NYSE:JNJ)’s stock has been rallying since the start of 2016 and recently made its lifetime high at $126.07. While this rally has been hugely beneficial for existing shareholders of the company, it has also reduced the annual dividend yield of the stock, which currently stands at 2.7%. Despite the terrific gains the stock has registered this year and its current trailing P/E ratio of 22.18, most analysts are still bullish on it. The 23 leading analysts and research firms on Wall Street that track Johnson & Johnson currently have an average rating of ‘Overweight’ and an average price target of $126.65 on it, which represents potential upside of 6.38%. Donald Yacktman’s Yacktman Asset Management lowered its stake in the company by 6% to 6.67 million shares during the second quarter.

#2 Crown Holdings, Inc. (NYSE:CCK)

– Shares Owned by Kynikos (as of June 30): 131,329

– Value of Holding (as of June 30): $6.65 Million

Moving on, Crown Holdings, Inc. (NYSE:CCK) was another stock in which Kynikos initiated a stake during the second quarter. Shares of the packaging products company have largely been range-bound for more than two years now, and are currently trading up by 3.12% in 2016. Some analysts who track the company feel that its current valuation makes it a better bet than most beverage companies, a segment from which Crown Holdings, Inc. (NYSE:CCK) derives a large chunk of its revenue. For its third quarter, analysts are expecting the company to report EPS of $1.30 on revenue of $2.40 billion. For the same quarter of the previous financial year, Crown Holdings, Inc. reported EPS of $1.34 on revenue of $2.46 billion. On July 25, analysts at Barclays reiterated their ‘Overweight’ rating on the stock while boosting their price target on it to $64 from $62. Lou Simpson‘s SQ Advisors cut its stake in Crown Holdings by half, to 1.46 million shares during the April-to-June period.

#1 Energizer Holdings Inc (NYSE:ENR)

– Shares Owned by Kynikos (as of June 30): 130,990

– Value of Holding (as of June 30): $6.74 Million

Energizer Holdings Inc (NYSE:ENR) was the top new stock pick of Kynikos during the second quarter. The company became a separate, publicly-traded entity last July after the completion of its spin-off from Edgewell Personal Care Co (NYSE:EPC). Since then, Energizer Holdings Inc (NYSE:ENR)’s stock has appreciated by over 33% and is currently trading up by 20% year-to-date. Energizer currently pays a quarterly dividend of $0.25 per share, which despite the huge rally in its stock, still translates into a respectable annual dividend yield of over 2%. Though a lot of analysts who track the company have been bearish on it for many months, citing the dim future prospects of the disposable battery industry, Energizer Holdings’ stock hasn’t endured any notable correction since the start of 2016. On August 10, analysts at Jefferies Group reiterated their ‘Hold’ rating on the stock.

Disclosure: None