Shah Capital Management’s Top Stock Picks For 2016

#3 Avon Products, Inc. (NYSE:AVP)

– Shares Owned by Shah Capital Management (as of December 31): 2.93 million

– Value of Holding (as of December 31): $11.86 million

Avon Products, Inc. (NYSE:AVP) became one of Shah Capital Management’s top picks during the third quarter of 2015, when the fund made an over tenfold increase in its stake. Amid a nearly 25% jump of Avon Products, Inc. (NYSE:AVP)’s stock during the fourth quarter, the fund inched up its stake in the company by 4%. Most of the gains in the fourth quarter  were registered amid rumors that the struggling cosmetic manufacturer and marketer has finally found an investor after spending months searching for a suitor. On December 17, the company said Cerberus Capital Management LP, a New York-based private equity firm, would acquire a 16.6% stake in the company and buy 80.1% of its North American business in a $605 million deal. At the beginning of 2016, shares of Avon Products saw a dramatic fall, but have recovered after the company reaffirmed its full-year outlook on January 21. Donald Yacktman‘s Yacktman Asset Management reduced its stake in the company by 8% to nearly 35 million shares during the fourth quarter.

#2 UTStarcom Holdings Corp (NASDAQ:UTSI)

– Shares Owned by Shah Capital Management (as of December 31): 5.65 million

– Value of Holding (as of December 31): $14 million

Though Shah Capital Management almost halved its stake UTStarcom Holdings Corp (NASDAQ:UTSI) during the fourth quarter, the company remained its second-largest holding at the end of December. Mr. Shah has been a director on the board of UTStarcom Holdings Corp (NASDAQ:UTSI) since 2013 and became the Chairman of the board in 2014. In a regulatory filing last August, it was revealed that Shah Capital Management had signed an agreement with China-based strategic investor Gu Guoping to sell its entire stake in UTStarcom Holdings Corp at $6.08 per share. The fund is expected to sell its remaining stake in the company this quarter. On January 11, UTStarcom Holdings Corp named Tim Ti as the new CEO of the company and on January 15 it appointed Zhaochen Huang as its new COO. Analysts believe Gu Guoping is in the process of acquiring a majority stake in the company and may even take it private.

#1 China Yuchai International Limited (NYSE:CYD)

– Shares Owned by Shah Capital Management (as of December 31): 3.16 million

– Value of Holding (as of December 31): $33.96 million

Amid a 13% decline registered by China Yuchai International Limited (NYSE:CYD)’s stock during the fourth quarter, Shah Capital Management increased its stake by 10%. The fund went activist on the company in 2013 and sent a letter to its Board urging it to acquire a 100% stake in its main operating subsidiary Guangxi Yuchai Machinery Company and to sell its entire stakes in a real estate and a consumer electronics distribution company. Though the board of China Yuchai International Limited (NYSE:CYD) didn’t comply with the requests made by the fund, Shah Capital Management remains one of the largest shareholders of the company citing that the company is undervalued at current levels. Shares of China Yuchai International Limited have lost 10% since the beginning of 2016 and are trading cheap at a trailing price to earnings ratio of 4.44. However, several analysts who track the stock justify the cheap valuation it trades at by citing the weakness in the overall Chinese economy and the uncertainty regarding the company’s performance. Jim Simons‘ Renaissance Technologies boosted its stake in China Yuchai International more than fivefold to 140,992 shares during the last quarter.

Disclosure: None