Marble Arch Investments was founded in 2007 by Scott McLellan, who had previously worked at Hound Partners. Hound’s manager, Jonathan Auerbach, is a Tiger Cub and so McLellan can trace his investment lineage to Julian Robertson as well. McLellan himself worked at Highbridge Capital Management and has an MBA from Northwestern. Marble Arch is a long/short equity fund. Read on to learn more about some of the fund’s top picks for the second quarter of 2012, according to its 13F filing, or see a longer list of the fund’s stock holdings.
Marble Arch owned 1.4 million shares of W.R. Grace & Co. (NYSE:GRA), flat from the beginning of the second quarter. The specialty chemicals company has seen its stock rise 70% over the last year and its market capitalization now comes in at $4.5 billion. It is best known for its catalysts used to convert petroleum into petroleum products, including gasoline and diesel. Earnings were down slightly in the company’s most recent quarter compared to a year ago. W.R. Grace trades at 17 times trailing earnings, with Wall Street analysts expecting moderate growth next year and bringing the forward P/E down to 13.
The fund owned 1.4 million shares of Liberty Global Inc. (NASDAQ:LBTYA), the broadband, TV, and phone company that resulted from the breakup of the larger Liberty organization. Liberty Global is expensive, at 33 times forward estimates of earnings for 2013, and its revenue was up only slightly last quarter versus a year earlier. Billionaire Chase Coleman’s Tiger Global Management was another hedge fund with a large position in the stock according to its 13F. We would avoid it for now on the basis of valuation.
Online travel advisor Tripadvisor Inc (NASDAQ:TRIP) was another of Marble Arch’s top picks as the fund reported a position of 1.5 million shares at the end of June. Tripadvisor IPO’d in December 2011 and is currently up 22% from the IPO price, bucking the trend of certain other recent Internet IPOs; however, the stock is down from its highs in July. In the second quarter of 2012, Tripadvisor reported lower earnings than in the same period in 2011 (likely explaining the stock’s recent decline)- a bit of a hiccup for a company whose valuation is based on future growth. Tripadvisor trades at 26 times trailing earnings, so we would want to see stronger performance from the company.
Google Inc (NASDAQ:GOOG) was another of the fund’s top picks, and Marble Arch was in good company as Google made our list of the ten most popular stocks among hedge funds for the second quarter (find more stocks that made the top ten list). Its stake increased slightly to a total of 110,000 shares of the Internet and technology giant. Google had been struggling earlier this year but its stock price is now up 14% for the year after a strong gain since mid-July. Google’s trailing P/E is 22; that is high on a pure value basis, but the company has a number of growth opportunities and we would say that it is at worst priced right and possibly even undervalued.
Marble Arch boosted its position in FleetCor Technologies, Inc. (NYSE:FLT) by 20% during the second quarter and closed June with 1.6 million shares in its portfolio. FleetCor serves transportation fleets (including those belonging to oil companies), including products which help drivers purchase fuel and lodging. Its stock is up 68% over the last year, and the fundamentals of the company show strong growth as well: in its most recent quarter its revenue was up 28% and its earnings were up 48%. At a $3.7 billion market cap, the stock trades at 21 times trailing earnings and 14 times forward earnings estimates. If Wall Street analysts are right about future growth, i.e. if future growth is as strong as growth over the last year, it could prove to be a good value.