United Rentals Inc. (URI), Techne Corporation (TECH), SBA Communications Corporation (SBAC): Amongst Rail-Splitter Capital Management’s Top Picks from Q2

John Croghan and Richard Fradin’s Rail-Splitter Capital Management has recently disclosed its long equity positions for the second quarter of 2014 in a filing with the SEC. The fund’s portfolio saw important modifications, especially amongst its top holdings. Rail-Splitter acquired 13 new stocks, increased its stakes in 12 more positions, and sold out of 15 of its preexisting holdings. So, let’s take a look at the fund’s top five picks for Q2.

Whirlpool Corporation (NYSE:WHR) was displaced from the first place that it occupied in the previous quarter, after the fund sold about 1/3 of its shares over Q2. The company was replaced by a newcomer at Rail-Splitter’s portfolio: United Rentals Inc. (NYSE:URI), a $10.4 billion market cap equipment rental company that operates in the U.S., Canada and Mexico. The fund started a position with 110,350 shares at United Rentals Inc. (NYSE:URI) over Q2. The stake is worth about $11.5 million. This position accounts for almost 4% of the fund’s total equity portfolio, valued at almost $300 million.

United Rentals, Inc. (NYSE:URI)

As we have recently reported, another fund that added United Rentals Inc. (NYSE:URI)’s stock to its portfolio over Q2 is Louis Navellier’s Navellier & Associates. The fund disclosed ownership of 457,817 shares, worth almost $48 million. Other major funds, like Paul Reeder And Edward Shapiro’s Par Capital Management are also betting on this company. Par Capital last declared ownership of 934,813 shares of the company, after a slight increase in its position in the stock.

Second in line is Techne Corporation (NASDAQ:TECH), a $3.4 billion market cap company engaged in the development, manufacturing and sale of biotechnology products and clinical diagnostic controls. Although the stock price is up almost 8% since the end of Q1, its valuation, at 30 times the company’s earnings still looks very attractive, especially when compared to its industry’s average of more than 70x P/E. This valuation, coupled with industry leading margins and above average returns, make it easy to understand why Rail-Splitter upped its stake by 3% over Q2. The fund now owns 116,083 shares of Techne Corporation (NASDAQ:TECH), worth more than $10 million, and stands amongst the top 5 hedge fund shareholders (amongst those we track) at the company.

Ken Griffin also seems to feel quite bullish about Techne Corporation (NASDAQ:TECH). Over the last reported quarter – Q1, his fund boosted its exposure to the company by 27%, and now owns 264,165 shares.

Next is an interesting case. Rail-Splitter held 111,150 shares of SBA Communications Corporation (NASDAQ:SBAC) by the end of Q1, and this holding occupied the seventh place in this list. Over Q2, the fund cut its exposure to SBA Communications Corporation (NASDAQ:SBAC) by 5%, but the value of this position grew on the back of a 12.75% increase in the stock price –since March 31 2014. This stake worth $10.7 million now occupies the third spot in this list, and accounts for 3.6% of the fund’s total equity portfolio.

On the opposite, the largest hedge fund shareholder at SBA Communications Corporation (NASDAQ:SBAC), Stephen Mandel’s Lone Pine Capital, last declared having upped its wage in the company by 64%, to 8.94 million shares, even though the company’s valuation does not look attractive, and its debt levels, quite concerning (debt-to-equity ratio reaches 16.1x, versus an industry mean of approximately 0.7x).

Another company that felt Rail-Splitter’s bullishness is PAREXEL International Corporation (NASDAQ:PRXL), $3 billion market cap biopharmaceutical company that is –also- amongst Ken Fisher’s Fisher Asset Management’s top small-cap stock picks for Q1. Although the fund trimmed its exposure by 2% over the last reported quarter, it still is the largest hedge fund stockholder at PAREXEL International Corporation (NASDAQ:PRXL), with 2.53 million shares, worth more than $137 million.

PAREXEL International Corporation (NASDAQ:PRXL)’s stock is up more than 18%, year-to-date, and analysts expect it to continue to rise up to, approximately, $60 per share (up from the current $53.45). Chuck Royce also seems to be bettin on this company, holding 455,000 shares, same as Jim Simons, who last declared possession of 645,300 shares.

Last is SanDisk Corporation (NASDAQ:SNDK), the only stock that was in last quarter’s list as well. This $23.8 billion market cap data storage solutions designer, developer and manufacturer saw Rail-Splitter sell 42,400 shares (or almost 1/3 of its holdings) over Q2. The fund now owns 98,250 shares of SanDisk Corporation (NASDAQ:SNDK), worth more than $10 million.

Rob Citrone’s Discovery Capital Management also cut its exposure to the company over Q1, but is still the largest hedge fund shareholder, with 7.95 million shares. SanDisk Corporation (NASDAQ:SNDK) has seen its stock appreciate by almost 50% year-to-date, so one can understand why, in spite of the bullish sentiment prevailing amongst analysts and hedge funds, some of the company’s biggest investors are selling the stock, seeking to capitalize this marked increase.

Disclosure: Javier Hasse holds no position in any stocks or funds mentioned

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