Hayman Capital Management is a hedge fund owned by its employees. It manages assets worth $1.1 billion and uses fundamental analysis to design its portfolio. The primary investing policy of this fund is focused on public equity and fixed income securities. It invests in companies that keep changing their strategies as per the market conditions to derive higher returns. According to its last 13F filing, the fund reported its top holdings in the following companies.
| Company | % in the portfolio |
|---|---|
| Tempur Sealy International | 48.46% |
| N ationstar Mortgage Holdings | 33.28% |
| Huntsman (NYSE:HUN) | 5.53% |
In my quest to identify the investment opportunity, I decided to analyze these three companies. Let’s analyze whether these companies have successfully implemented the expansion strategies.
Expansion strategy will boost revenue
Nationstar’s portfolio is comprised of almost $23 billion of unpaid principal balance, or UPB. UPB is the outstanding balance that needs to be paid on the principal amount of a loan. The company also has a residential mortgage loan facility on government-sponsored organizations.
For the expansion in its mortgage service, Nationstar acquired the mortgage service segment of Bank of America Corp (NYSE:BAC). Bank of America Corp (NYSE:BAC)’s residential mortgage service rights were acquired for approximately $10.4 billion in the first quarter of 2013. It will give Nationstar operational duties on existing customers of Bank of America Corp (NYSE:BAC), which includes loan holdings of the bank, public bodies, non-government investment funds, and proprietors of mortgage loans and securities. The company already has more than $430 billion worth of mortgage service rights to add, and after this deal it will be the largest non-bank mortgage service provider in the U.S.
Nationstar, in the mortgage segment, provides direct lending facility to customers and has also initiated the wholesale-lending segment. To expand in this segment, the company has acquired the origination platform and unfunded loan network of Greenlight Financial Service. This deal closed on June 3, 2013 for $75 million. The acquired company has 65% of its operations in California and has a license to operate in another 40 states. This acquisition will increase the services of the company by 50%, amounting to $312 billion in the unpaid principal balance segment.
Capturing market with new product range
Tempur Sealy International Inc (NYSE:TPX) acquired Sealy in the first quarter of 2013 for $1.3 billion. Sealy reported a net sales increase of 8.8% year over year, amounting to $339.6 million in its first quarter of 2013. The acquisition was done to increase Tempur Sealy International Inc (NYSE:TPX)’s product range and for brand building. After acquisition, the company changed its name to Tempur Sealy International.
