Alexander Roepers‘ Atlantic Investment Management is among the many hedge funds that recently filed their 13Fs with the U.S. Securities and Exchange Commission, disclosing their holdings in U.S-traded companies as of March 31. The filing showed that Roeper’s fund $1.33 billion worth of equities in its portfolio and that the firm was primarily invested in the materials and industrials sectors, which comprised 72% of its portfolio’s value. Roepers founded the hedge fund in 1988 and has been exploring a strategy that mainly targets mid and small-cap stocks, with a great focus on fundamental value. The firm registered enormous growth between 1993 and 2010, having compounded annual returns of about 22%. In this article, we are going to focus on its top three small-cap stocks, which also ranked as three of the fund’s top four overall stock picks. They are Owens-Illinois Inc (NYSE:OI), Triumph Group Inc (NYSE:TGI), and Oil States International, Inc. (NYSE:OIS).
At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 144% and beating the market by more than 84 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise rather than large-cap stocks.
Roepers held a total of 12.55 million shares valued at $292.67 million of Owens-Illinois Inc (NYSE:OI), placing him as the company’s biggest shareholder in our database, and with the company representing his top pick with 22.01% exposure to the stock in his public equity portfolio. The position was increased slightly during the first quarter. In an effort to have interests in the fast growing and lucrative glass market, Owens-Illinois Inc (NYSE:OI) recently announced that it had reached a deal to acquire the glass company Vitro for approximately $2.15 billion. The acquisition is expected to generate roughly $945 million in revenue annually and an adjusted EBITDA of $278 million. Another move that the company has undertaken to accelerate its growth is to reshuffle its management. The changes were effected on June 1 and touched on various management positions, including the presidency of its North America and Asia Pacific segments. The company’s performance in the first quarter beat analysts’ consensus estimate, posting $0.44 in earnings per share, a beat of $0.02. The figure however represented a decrease of $0.10 year-over-year. Analysts expect the stock to register $2.15 in earnings per share for the current fiscal year. There are several other hedge funds invested in the stock besides Atlantic Investment Management, including Mitch Cantor’s Mountain Lake Investment Management, Julian Allen’s Spitfire Capital, and Zeke Ashton‘s Centaur Capital Partners.