Philip Hempleman founded Ardsley Partners in 1987. Connecticut-based Ardsley is a long/short equity hedge fund with approximately $1 billion under management. The fund invests globally, but has an affinity for chemical and chemical-related companies. As well, Ardsley focuses on value stocks that are growth oriented. In Ardsley’s latest 13F filing, the fund shook things up among its top five holdings by adding a new company entirely, significantly decreasing a stake in one, while upping ownership of another substantially. In short, Ardsley appears to be overweight pharmaceutical companies. Here’s a more detailed look.
Amarin Corporation plc (NASDAQ:AMRN) is a late-stage biopharmaceutical company focusing on cardiovascular disease. Ardsley first got serious about Amarin in November 2011. Ardsley dumped 26% of its 4Q 2011 shares in the first quarter of this year, and during the second quarter decreased its stake in Amarin by 57%,, but the company still represents Ardsley’s largest holding at 6.13% of its 13F portfolio. Ardsley now only owns 1.3% of the company, versus its 4Q 2011 stake of 5.3%. Ardsley may well believe all the value has been recognized in Amarin for the time being, with the company up almost 90% year to date, and Hempleman would not be the only hedge fund manager with this belief. The company has no revenues and trades at a forward P/E of 283.
Merck & Co., Inc. (NSYE:MRK) represents 5.3% of Ardsley’s 13F portfolio. Merck pays a stable dividend, yielding 3.8% and trades similar to its peers on a multiples basis. There have been some insider sales around the $44-45 range that caught our eye. Also, EPS estimates show a decline from 2012 to 2013, decreasing from $3.81 in 2012 to $3.72 in 2013. The company has pulled back on long-term guidance and plans to cut its workforce by 12-13% through 2015.
Johnson & Johnson (NYSE:JNJ) is a new position for Ardsley and its third largest 13F portfolio, making up 4.75% of its 13F holdings. Johnson & Johnson is also one of D.E. Shaw’s top dividend stocks, while Ken Fisher and Warren Buffet held positions in the company at the end of the second quarter as well. Johnson & Johnson trades at a trailing 22 P/E versus a forward P/E of 13. The company continues to show strong performance and is expected to increase EPS by 8% from 2012 to 2013.
Pfizer Inc. (NYSE:PFE) makes up the fourth largest Ardsley holding and is the fourth drug related company in Ardsley’s top five holdings. The company has recently lost patent protection of one of its major drugs, Lipitor, but trades strong with a trailing P/E of 18 versus a forward P/E of 10. The company also reported second quarter EPS that was up 5% year-over-year and beat estimates by 15%, coming in at $0.62 compared to $0.54 estimates. The company also pays a dividend yield of 3.7%.
Ardsley upped its stake in United Rentals, Inc. (NYSE:URI) by 72% in the second quarter. United Rentals is the largest equipment rental company in the world. As the real estate market appears to be stabling, United Rentals is expecting rental rate improvements to come in as high as 6.5% for 2012, versus the previous outlook of 6%. The company posted strong second quarter numbers, with revenues up 58% from the same quarter last year and a rental rate increase of 7.4%. Although the company trades at a trailing P/E of 49, the forward P/E is 8, with a PEG (based on the 5-year expected growth rate) of 1.0.
Again, Ardsley has its top five holdings weighted heavily toward the healthcare industry, owning three of the top ten most popular healthcare stocks among hedge funds, that together make up over 14% of its 13F portfolio.