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.
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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.
As of March 31, the hedge fund owns 4.70 million shares of Triumph Group Inc (NYSE:TGI), with a market value of $280.68 million. The company’s most recent quarterly report showed that it registered earnings per share of $1.71, which meant a surprise factor of 3.01%. For the current quarter, nine analysts expect the company to post earnings per share of $1.34, while the company’s stock currently sports an average price target of $74, indicating potential upside of about 10%. Triumph Group Inc (NYSE:TGI) is expected to grow at a rate of 7.2% over the next three to five years, according to three analysts that have covered the stock. There were a total of 27 hedge funds that had stakes in the company as of March 31, out of the 730 that we monitor. A few examples are Osterweis Capital Management, which had a total of 1.00 million shares worth $59.83 million and billionaire David Tepper‘s Appaloosa Management LP.
At the end of the first quarter, Atlantic Investment Management held a total of 3.50 million shares of Oil States International, Inc. (NYSE:OIS), which had a market value of $139.20 million at that time. The Houston, Texas-based company currently has a recommendation of “Hold” from twelve analysts that have recently commented on the stock, along with a 12-month price target of $54.19, giving it great upside potential of about 30%. Oil States International, Inc. (NYSE:OIS) is an energy services company that focuses on manufacturing products for deepwater production facilities among other diverse drilling equipment. The $2.11 billion company has a price to earnings ratio of 17.23 and reported earnings per share of $0.45 in its most recent quarterly earnings report, beating analysts’ consensus estimate by $0.01. However, that marked a significant decrease of $1.05 compared to the company’s performance in the same quarter last year. Atlantic Investment Management is also the biggest shareholder of this company in our database, while Vince Maddi and Shawn Brennan‘s SIR Capital Management, and Breton Hill Capital were among the other funds that held positions.
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