In late 2015, Seminole Management Company, a New York-based hedge fund firm co-founded by Michael Messner and Paul Shiverick in 1995, revealed its plans to return $400 million of outside investors’ money because it could not “maintain historical-like returns” in a changed trading environment without reducing assets under management. “In short, the game has changed” wrote Seminole’s co-founders in a letter to investors for the final quarter of 2015.
Seminole Management blamed the incursion of high-frequency trading and the rise of passive investments such as exchange-traded funds for its poor performance, saying that “there are fewer traders at the poker table to play against.” Although the firm’s decision to return 10% of assets under management back to outside investors does not seem to be a game-changer, the reduced pool of capital might have improved the investment firm’s capital allocation strategy. The New York-based hedge fund recently submitted its quarterly 13F filing for the June quarter, revealing an equity portfolio valued at $986.75 million, down from the $1.25 billion that its portfolio was worth at the end of the March quarter. With that in mind, the following article will lay out a list of five positions Seminole Management boosted massively during the second quarter of 2016, even as it trimmed its portfolio by over 20%.
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#5. Royal Dutch Shell plc (ADR) (NYSE:RDS.A)
– Shares Owned by Seminole Management Company (as of June 30): 722,125
– Value of Seminole Management Company’s Holding (as of June 30): $39.88 Million
Seminole Management Company owns 722,125 American Depositary Shares representing two Class A shares of Royal Dutch Shell plc (ADR) (NYSE:RDS.A) as of the end of the second quarter, 517,218 ADS’s more than it did at the end of the first quarter. The upped position was valued at $39.88 million on June 30 and accounted for 4.0% of the value of the hedge fund’s equity portfolio.
The largest oil company in Europe has seen its market value gain 17% since the beginning of 2016. In mid-February, Royal Dutch Shell completed the acquisition of BG Group plc for $54 billion, one of the largest takeovers in UK corporate history. The multi-billion-dollar deal was meant to increase the acquirer’s focus on liquefied natural gas (LNG) and deep-water exploration and production. The company’s second quarter oil and natural gas production increased by 28% year-over-year to 3.51 million barrels of oil equivalent per day, mainly due to additional volumes from the freshly-acquired BG Group. However, Royal Dutch Shell’s second quarter earnings adjusted for one-time items and inventory changes came in at $1.05 billion, well down from $3.76 billion recorded a year earlier. Ken Fisher’s Fisher Asset Management reported owning 119,090 ADS’s of Royal Dutch Shell plc (ADR) (NYSE:RDS.A) during the latest round of 13F filings.
#4. BP plc (ADR) (NYSE:BP)
– Shares Owned by Seminole Management Company (as of June 30): 1.31 Million
– Value of Seminole Management Company’s Holding (as of June 30): $46.53 Million
The New York-based investment firm upped its position in BP plc (ADR) (NYSE:BP) by 82% during the June quarter to 1.31 million ADS’s. The increased position was worth $46.53 million at the end of June. The embattled British oil company recorded profit adjusted for one-time items and inventory changes of $720 million for the second quarter,nearly half of the $1.3 billion in profit that it posted a year prior. The company blamed the weak financial performance on low oil and gas prices and “significantly lower” refining margins. However, BP believes the conclusion of its long-running Deepwater Horizon payments and woes related to the explosion of the firm’s rig in the Gulf of Mexico in April 2010 will enable the company to revitalize its growth in the years ahead. The total cost of the disaster in the Gulf of Mexico was $61.8 billion. BP’s ADS’s have appreciated by 10% thus far in 2016. Beech Hill Partners, run by Paul Cantor, acquired a new stake of 6,200 ADS’s of BP plc (ADR) (NYSE:BP) during the second quarter.
Let’s head to the second page of this article where we will reveal three other bullish moves completed by Seminole Management during the June quarter.