Veeco Instruments Inc. (VECO), Archer Daniels Midland Company (ADM): Hugh Hendry’s Bullish Picks in a Bearish Environment (Plus His Top Pick)

Hugh Hendry’s Eclectica Asset Management posted strong returns throughout the first 11 months of 2014, with a net year-to-date return of 7.8%. It hasn’t come easy for the small fund however, which suffered through a slow start to the year, and was down 5% through the end of July. That came on the heels of a flat 2013, and a 2012 which saw the fund lose 1.7%. Those returns since the fund’s dominant 2011 when it returned 12.1% have caused investors to flee, and some of Hendry’s personnel along with them, including former CEO Paul Taylor, as assets under management for the fund have crumbled from over $1 billion to under $500 million.

Eclectica Asset Management

Hendry, one of Britain’s most prominent hedge fund managers and a well-known personality there, started Eclectica in 2005 after gaining investment experience at Baillie Gifford, Credit Suisse Asset Management and Crispin Odey’s Odey Asset Management Group. Hendry once proclaimed himself the “last bear standing”, and was notably bearish during the bull market that followed the financial crisis of 2008/2009, losing 9% in 2009. More recently however, Hendry has advocated going long on just about anything, declaring that it would be foolish to stand in the way of the current bull market.

Eclectica’s equity portfolio has dissipated in value alongside its assets under management, falling from $295 million at the end of the first quarter of 2012, to just $42 million at the end of 2014. The latest filing was another 20% drop in value for the portfolio from the previous quarter, when it was valued at $53.72 million. Given the circumstances, Hendry slashed many of his positions in the fourth quarter, closing 9 of his 37 positions, and slashing his exposure to 8 others.

Alternatively, he raised his exposure to just 2 stocks during the quarter, Veeco Instruments Inc. (NASDAQ:VECO), and Archer Daniels Midland Company (NYSE:ADM), making these stocks quite intriguing as his standout picks, especially given the strong performance his fund enjoyed in October and November, up 9%.

Hendry was by far the most bullish on Veeco Instruments Inc. (NASDAQ:VECO), a stock that he has gone in and out of over the past few quarters. He slashed his exposure to it by 67% during the third quarter, after raising his exposure by 30% in the second quarter. Now he appears to be putting a lot of faith back into this stock, as he raised his position by 96% during the fourth quarter, purchasing 36,300 shares to bring his total to 73,910.

Veeco Instruments Inc. (NASDAQ:VECO), an LED and chip manufacturer was essentially flat during the fourth quarter, during which they acquired semiconductor processing equipment manufacturer Solid State Equipment Holdings LLC. 2015 has not been as kind, with Veeco tumbling 11.7%. Veeco announces their fourth-quarter and full-year financial results on February 17.

In Archer Daniels Midland Company (NYSE:ADM), Hendry added 9,300 shares to his holding, a 21% from the previous quarter, giving him 52,070 total. Interesting, ADM was also relatively flat during the fourth quarter, and not responsible for Hendry’s large returns in October and November.

Archer Daniels Midland Company (NYSE:ADM)

The grain processor, which transforms crops like corn, soybeans, and wheat, into other foodstuffs and food-derived products has also suffered in 2015, down 9.27%, after a fairly steady rise from the end of 2012 following the droughts in the U.S, up 74.35%. Despite that, analysts are bullish on the stock given rising commodity prices and decreasing production costs in the sector.

Regardless, the very poor early 2015 returns from his 4th and 5th largest positions at the end of the year seem to spell trouble for Hendry’s prospects thus far. Lastly, let’s look at Altria Group Inc (NYSE:MO), which remained Hendry’s most valuable position, despite slashing his holding by 10% during the quarter, selling off 8,700 shares to leave him with 75,200.

Altria Group Inc (NYSE:MO) was one of his shining lights during that strong October and November push, the newly opened position in the third quarter returning 9.17% during the first two months of the fourth, the finishing touches on a strong year for the tobacco and cigar manufacturer, which was rated as one of the best dividend bets in the middle of the year. Shares of the parent company of Philip Morris, John Middleton, and U.S Smokeless Tobacco Company were up 28.61% for the year.

Thankfully for Hendry, his best bet has enjoyed a strong 2015 as well, up 11%. Despite the push away from smoking in the U.S which hit competitor Reynolds American, Inc. (NYSE:RAI) particularly hard during the fourth quarter, with sales diving 5%, Altria has remained relatively stable. Fourth quarter results showed increased revenue of 2.9% from the same year-ago period as margins increased, and though cigarette sales continued to decline, there was a slight uptick in the sales of smokeless products. Altria holds about a 40% stake of the tobacco market in the U.S.

Disclosure: None