Jay Genzer’s Thames Capital Management is a long/short global equity hedge fund that was founded at the start of 2017. Before launching his own fund, Genzer managed a private family office for over a decade and prior to that worked for both Cantillon Capital and Lazard Asset Management as a portfolio manager.
Thames Capital employs a fundamental, bottom-up approach to stock selection, with an emphasis on pinpointing a company’s future financial productivity, which it believes to be a key driver of returns. The fund made a huge splash in its first year, delivering returns of 31.24%. It wasn’t as fortunate in 2018, as the fund lost 6.71%, but it fared much better in 2019, posting 16.47% gains.
There was quite a bit of turnover in Thames Capital’s portfolio during Q2, mostly in the form of additions, with the fund adding 19 new holdings and increasing its stake in 14 existing positions. Let’s take a look at five of its biggest purchases during the quarter, which included several food stocks.
The Coca-Cola Company (NYSE:KO)
– Shares Bought During Q2: 194,337
– Value of Holding (as of June 30): $8.68 million
– Q3 Return: 10.50%
Thames Capital was one of 59 hedge funds tracked by Insider Monkey to be long The Coca-Cola Company (NYSE:KO) as of June 30. Hedge fund ownership of KO has steadily risen over the past two years after bottoming out at just 39 funds in the middle of 2018. Billionaire investing legend Warren Buffett remains one of Coca-Cola’s biggest supporters, owning nearly $18 billion in KO shares as of June 30.
Coca-Cola continues to search for new ways to counter sluggish sales of its flagship product. Its foray into coconut water, Zico, was a failure, with the company recently announcing that it was axing that brand. The next experimental drink up the company’s sleeve is a coffee-infused cola, which is expected to launch in January. Coca-Cola’s organic revenue sank by 26% in Q2 and the company believes a full recovery could take years.
Starbucks Corporation (NASDAQ:SBUX)
– Shares Bought During Q2: 33,566
– Value of Holding (as of June 30): $7.60 million
– Q3 Return: 16.75%
While Thames Capital was fortifying its Starbucks Corporation (NASDAQ:SBUX) position, numerous hedge funds were bailing on the stock in Q2, as hedge fund ownership sank by 21%. Covid has hit coffee chains particularly hard, with many no longer needing to commuting to work, and Starbucks’ sales are still down in response. Starbucks’ sales were still down by 11% year-over-year in August, despite enhanced curbside pick-up and drive-thru providing a much-needed boost.
Nonetheless, the stock had a big Q3, gaining nearly 17% as the recovery begins to take shape, though analysts expect a full sales recovery to take until 2022 to be realized. In the meantime, investors can at least enjoy Starbucks’ growing dividend, which has been raised by 125% over the past four years and now yields just under 2%.
Chipotle Mexican Grill, Inc. (NYSE:CMG)
– Shares Bought During Q2: 3,422
– Value of Holding (as of June 30): $3.60 million
– Q3 Return: 18.18%
Thames Capital was again at odds with the larger hedge fund industry when it comes to Chipotle Mexican Grill, Inc. (NYSE:CMG), as there was a 15% drop in ownership among the funds tracked by Insider Monkey. Eashwar Krishnan’s Tybourne Capital Management was among those saying adios to CMG shares, selling off a $134 million position in the stock.
Chipotle shares also had a strong Q3, gaining 18%, and have been one of the top performers on the S&P 500 this year. Surging digital sales, which are expected to hit $2.4 billion this year, a 140% jump from 2019, have helped offset the decline in the fast-casual chain’s dining business and are expected to account for up to half of all sales even post-pandemic.
Hyatt Hotels Corporation (NYSE:H)
– Shares Bought During Q2: 55,840
– Value of Holding (as of June 30): $2.81 million
– Q3 Return: 6.12%
Thames Capital also added to its positions in Hyatt Hotels Corporation (NYSE:H) and Hilton during Q2, taking advantage of their severely depressed prices with a long-term outlook in mind. Hyatt’s RevPAR understandably sank year-over-year in July, by 76%, but the company is in a stable financial position, with enough liquidity to keep it going for another three years based on Q2 demand. 27 of the hedge funds tracked by Insider Monkey’s database were long Hyatt on June 30, down from 37 in the middle of 2018.
Hilton Worldwide Holdings Inc (NYSE:HLT)
– Shares Bought During Q2: 34,832
– Value of Holding (as of June 30): $2.56 million
– Q3 Return: 16.16%
Hedge fund ownership of Hilton Worldwide Holdings Inc (NYSE:HLT) has been volatile recently, sinking by 25% in Q1 before rebounding with a 23% jump in Q2. Bill Ackman’s Pershing Square, which owned a mere 7 stocks on June 30, including Hilton, Starbucks and Chipotle, has rode that small portfolio to massive net gains of 47% in 2020 through the end of September.
Hilton suffered an equally devastating RevPAR decrease in Q2 as Hyatt, crashing by 81%, but a big rebound in 2021 wouldn’t be surprising, especially given the company’s robust unit growth, which hit a record 6.6% last year, and development pipeline, with nearly 400,000 rooms in its pipeline at the start of 2020, including 116,000 approved rooms.
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Disclosure: None. This article is originally published at Insider Monkey.