Locust Wood Capital LP is a New York-based investment management firm founded by Wall Street veteran Stephen J. Errico in July 2002. Mr. Errico had previously served as a successful adviser at Lehman Brothers, Paine Webber and Morgan Stanley. Locust Wood was launched with $29 million in capital and currently deploys approximately $1.1 billion for its limited partners.
The New York-based asset manager predominantly seeks to invest in companies undergoing significant corporate transformations. Precisely, Mr. Errico’s investment firm attempts to capitalize on mispriced corporate changes. Locust Wood Capital LP also hedges its exposure to capital markets by holding cash, employing derivatives and selling short securities. Moving on to the asset manager’s recent performance, Locust Wood posted a negative net-of-fees return of 1.75% for the first quarter and a loss of 1.00% for the second quarter. Despite the rather disappointing performance, Mr. Errico and his team believe the performance of their portfolio will improve in the foreseeable future, as they “see a very wide discount between the current market price of our portfolio and its intrinsic value”. Without further ado, let’s have a look at five new equity positions added to Locust Wood’s portfolio during the June quarter.
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#5. Hewlett Packard Enterprise Co (NYSE:HPE)
– Shares owned by Locust Wood Capital LP as of June 30: 828,495
– Value of Locust Wood Capital LP’s holding as of June 30: $15.14 Million
Locust Wood Capital LP acquired a new stake of 828,495 shares of Hewlett Packard Enterprise Co (NYSE:HPE) during the second quarter of 2016, which was valued at $15.14 million on June 30. The new position accounted for 1.7% of the hedge fund’s entire portfolio. Hewlett Packard shares have gained an impressive 38% since the beginning of 2016, partially reflecting fresh rumors about a group of private equity firms being interested in buying the enterprise technology company in a possible $40 billion-plus deal. KKR & Co., Apollo Global Management LLC and Carlyle Group LP are “sniffing around” Hewlett Packard, according to fresh media reports. However, Reuters reports that various private equity buyers are considering “acquiring some software assets” the company has been planning to divest, “worth between $6 billion and $8 billion, rather than the entire company”. In response, analysts at Wells Fargo reiterated their ‘Outperform’ rating on Hewlett Packard and raised their valuation range to $23-to-$25 from $20-to-$22, saying that a buyout represents a likely possibility. Andy Redleaf’s Whitebox Advisors owns 929,325 shares of Hewlett Packard Enterprise Co (NYSE:HPE) as of June 30.
#4. Antero Resources Corp (NYSE:AR)
– Shares owned by Locust Wood Capital LP as of June 30: 613,890
– Value of Locust Wood Capital LP’s holding as of June 30: $15.95 Million
The New York-based asset manager added a 613,890-share position in Antero Resources Corp (NYSE:AR) to its pool of holdings during the April-to-June quarter, which was worth $15.95 million on June 30. The independent oil and natural gas company engaged in the exploration, development and acquisition of natural gas, NGLs, and oil properties located in the Appalachian Basin has seen the value of its stock gain 20% since the start of the year. In mid-July, analysts at Jefferies upgraded Antero Resources to ‘Hold’ from ‘Underperform’ and raised their price target on the stock to $27 from $24, citing the company’s recent land purchase in West Virginia. In early June, Antero agreed to acquire roughly 55,000 net acres in the core of the Marcellus Shale for $450 million. “This core acreage complements the existing AR footprint and the main driver of our increasing price target”, said Jefferies analysts. Seth Klarman’s Baupost Group LLC was the owner of 21.51 million shares of Antero Resources Corp (NYSE:AR) at the end of the first quarter.
The second page of this article will disclose three other new additions made by Locust Wood Capital LP during the second quarter.