Glenn Russell Dubin‘s Highbridge Capital Management LLC is a privately owned hedge fund sponsor operating as a subsidiary of JPMorgan Chase & Co. The hedge fund co-founded by Dubin and Henry Swieca in 1992 has its headquarters in New York City and works worldwide out of a number of offices in different regions and countries. Recently, the managers of Highbridge Capital Management have been involved in discussions to buy back the alternative investment firm from JPMorgan Chase & Co. According to the fund’s latest 13F filing for the reporting period of March 31, this multi-strategy alternative investment management firm currently manages an equity portfolio worth $7.25 billion and has 1,350 active positions. Some of Highbridge Capital Management’s largest new holdings at the end of the first quarter are represented by the following American companies: Ralph Lauren Corporation (NYSE:RL), United Rentals Inc. (NYSE:URI) and Fiat Chrysler Automobiles N.V. (NYSE:FCAM), and we’ll discuss those purchases in this article.
Hedge funds and other big money managers like Dubin tend to have the largest amounts of their capital invested in large and mega-cap stocks like Gilead Sciences, Inc. (NASDAQ:GILD) (Dubin’s top long position) because these companies allow for much greater capital allocation. That’s why if we take a look at the most popular stocks among funds, we won’t find any mid- or small-cap stocks there. However, our backtests of hedge funds’ equity portfolios between 1999 and 2012 revealed that the 50 most popular stocks among hedge funds underperformed the market by seven basis points per month, showing that their most popular picks and the ones that received the bulk of their capital were not actually their BEST picks. On the other hand, their top small-cap picks performed considerably better, outperforming the market by 95 basis points per month. This was confirmed through backtesting and in forward tests of our small-cap strategy since August 2012. The strategy, which involves imitating the 15 most popular small-cap picks among hedge funds has provided gains of more than 139%, beating the broader market by over 80 percentage points through the end of April (see the details).
Highbridge Capital Management purchased a 426,310 share stake in Ralph Lauren Corporation (NYSE:RL) during the first quarter, with the holding valued at $56.06 million. The stock price of the newly acquired holding has dropped significantly since the beginning of the year and is currently bouncing up and down at around $131 per share. The American leader in the design, marketing and distribution of premium lifestyle products reported earnings per share (EPS) of $1.41, beating the Zacks Consensus Estimate of $1.32 EPS. The better-than-expected results for the last quarter might be the first sign of strong future financial performance. Nevertheless, Ralph Lauren’s net revenues for the last reporting quarter missed the Zacks Consensus Estimate, which investors appear to be more worried about than they are pleased over the improved earnings. Shares are down 29% year-to-date, and only time will tell whether the stock’s sharp decline this year signaled the perfect opportunity for investors like Dubin to enter the stock, or is the beginning of a longer downward trend. Along with Highbridge Capital Management, some other funds also increased their stakes in Ralph Lauren Corporation (NYSE:RL) during the first quarter, including the hedge fund led by Martin D. Sass.
Highbridge Capital Management also opened a long position in United Rentals Inc. (NYSE:URI) during the first quarter, another stock that struggled mightily during the first quarter, down by more than 10%, but has since rebounded to move into positive territory for the year. Dubin’s fund acquired a stake of 612,714 shares worth $55.86 million in the largest equipment rental company in the world. United Rentals produced strong financial results during the first quarter of 2015, which helped spur the stock’s turnaround, with the company’s earnings of $1.34 easily beating the Zacks Consensus Estimate of $1.16. Although the rental company has faced numerous challenges lately such us the decline in the oil and gas market, the harsh winter, and the strong U.S. dollar, United Rentals generated better-than-expected financial results. Barry Wittlin’s WCG Management and Edward Goodnow’s Goodnow Investment Group remain bullish on United Rentals Inc. (NYSE:URI) as their stakes in the rental company were also increased during the quarter.
The latest filing also revealed Highbridge’s acquisition of a 397,000 share stake in Fiat Chrysler Automobiles N.V. (NYSE:FCAM), valued at $54.67 million. The world’s seventh-largest automaker is currently viewed as the shining star in the auto industry. Despite the fact that this stock has been trading in the U.S. only since December (Fiat’s other ticker, NYSE:FCAU has been trading since October), it has already increased by 30% lifetime. Moreover, European car sales have been on an uptrend for 20 consecutive months, which has helped Fiat Chrysler achieve a rise of 13% in its car sales in Europe during April. While it is believed that the European car market has been performing above expectations, Fiat Chrysler Automobiles N.V. (NYSE:FCAM) also recently regained the number one automaker ranking in Brazil, a burgeoning market and one which is expected to help Fiat Chrysler Automobiles deliver continued strong financial performance in the medium- and long-term. Rob Citrone‘s Discovery Capital Management is one of the investment firms with a large position in the recently-listed company.
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