Billionaire Alan Howard Is Betting Big On Latin American Stocks For Q4

Brevan Howard is a Saint Helier, Jersey-based macro-focused global alternative asset management firm founded by billionaire Alan Howard and Jean-Philippe Blochet in 2002. Apart from its headquarters in Saint Helier, the firm also has offices in London, Hong Kong, Geneva, New York, Washington and Tel Aviv. Mr. Blochet left the firm in 2009 and currently serves as a senior portfolio manager at Moore Capital Management. Mr. Howard, who currently heads Brevan Howard, started his career at Salomon Brothers and later went on to become the head of proprietary trading at Credit Suisse First Boston. In 2013, Forbes Magazine listed Mr. Howard as one of the 40 Highest-Earning hedge fund managers. With around $40 billion in assets under management as of October 2013, the fund is widely considered one of the best-performing and largest hedge funds based out of Europe. Brevan Howard recently submitted its 13F filing with the Securities and Exchange Commission for the reporting quarter ending September 30 revealing a U.S equity portfolio worth almost $200 million. The filing also revealed that the fund had a very high quarter-over-quarter turnover of 110.53% in its equity portfolio during the July-to-September period. In this article we are going to discuss and analyze Brevan Howard’s top five U.S-listed stock picks going into the fourth quarter.

We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about six basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 in real time and these stocks beat the market by 53 percentage points (102% return vs. the S&P 500’s 49% gain) over the last 38 months (see the details here).

#5 Cresud S.A.C.I.F. y A. (ADR) (NASDAQ:CRESY)

 – Shares Owned by Brevan Howard (as of September 30): 1.08 Million

 – Value of Holding (as of September 30): $10.52 Million

Brevan Howard made full use of the nearly 25% decline that shares of Cresud S.A.C.I.F. y A. (ADR) (NASDAQ:CRESY) suffered during the third quarter by increasing its stake in the company by 28% during the period. Although shares of Cresud S.A.C.I.F. y A. (ADR) (NASDAQ:CRESY) recovered significantly from their third quarter slump in October, they recently declined again after the company reported its fiscal 2016 first quarter results and currently trade up by 8% year-to-date. The per share loss for the quarter came in at ARS 0.58 ($0.06) on revenue of ARS 1.62 billion ($167.43 million), compared to a per share loss of ARS 0.25 ($0.03) on revenue of $1.52 billion ($157.10 million) that the company had reported for the first quarter of fiscal year 2015. With ownership of over 2.5 million shares, Richard Mashaal‘s Rima Senvest Management was the largest shareholder of the company at the end of September among the funds covered by Insider Monkey.

#4 Grupo Financiero Galicia S.A. (ADR) (NASDAQ:GGAL)

 – Shares Owned by Brevan Howard (as of September 30): $1.1 Million

 – Value of Holding (as of September 30): $19.735 Million

Grupo Financiero Galicia S.A. (ADR) (NASDAQ:GGAL) has been one of the best performing Latin American financial stocks this year, with its shares trading up by almost 55% year-to-date. Since a large part of those gains came after the third quarter, it can be said in hindsight that Brevan Howard’s decision to increas its stake in the company by 61% during the July-to-September period was a wise one. For the third quarter, the company reported EPS of ARS 0.91 ($0.09) on revenue of ARS 6.33 billion ($654.22 million), compared to the EPS of ARS 0.72 ($0.07) on revenue of ARS 4.9 billion ($506.43 million) that it reported for the same quarter of last year. On July 20 analysts at Piper Jaffray upgraded Grupo Financiero Galicia S.A. (ADR) (NASDAQ:GGAL)’s stock to ‘Outperform’ from ‘Market Perform’, and have a price target of $30 on it. Edmond M. Safra‘s EMS Capital was another hedge fund that increased its stake in the company during the third quarter; it added an additional 66% to its holding of Grupo Financiero Galicia S.A. and held 806,338 shares as of September 30.

#3 Adecoagro SA (NYSE:AGRO)

 – Shares Owned by Brevan Howard (as of September 30): 2.67 Million

 – Value of Holding (as of September 30): $21.31 Million

Owing to the large stake that Brevan Howard initiated in the third quarter, agro holding company Adecoagro SA (NYSE:AGRO) ended up becoming the fund’s third-largest equity holding by the end of September. Shares of Adecoagro SA (NYSE:AGRO) have witnessed a massive rally since the start of October and thanks largely to that, are currently trading up by over 36% year-to-date. On October 16, analysts at JPMorgan Chase & Co. reiterated their ‘Overweight’ rating on the stock, while upping their price target on it to $12.50 from $12.00. On November 23, analysts at Morgan Stanley also reiterated their ‘Overweight’ rating on the stock and increased their price target on it as well, to $15.00 from $13.60. Ken Griffin‘s Citadel Investment Group more than doubled its stake in Adecoagro SA to 69,051 shares during the third quarter.

#2 Pampa Energia S.A. (ADR) (NYSE:PAM)

 – Shares Owned by Brevan Howard (as of September 30): 1.53 Million

 – Value of Holding (as of September 30): $23.4 Million

Moving on, the market capitalization of integrated electric company Pampa Energia S.A. (ADR) (NYSE:PAM) has more than doubled this year, with its stock currently trading up by 114.57% year-to-date. During the third quarter, when the stock of the company remained largely flat, Brevan Howard added an additional 44% to its Pampa Energia S.A. (ADR) (NYSE:PAM) holding. The company reported its third quarter results on November 11, declaring EPS of ARS 0.03 ($ 0.0031) on revenue of ARS 1.91 billion ($197.40 million), compared to the EPS of ARS 0.07 ($0.01) on revenue of ARS 1.62 billion ($167.43 million) it had reported for the same quarter of last year. Fortress Investment Group initiated a stake in Pampa Energia S.A. during the third quarter by purchasing 51,748 shares of the company.

#1 YPF SA (ADR) (NYSE:YPF)

 – Shares Owned by Brevan Howard (as of September 30): 2.32 Million

 – Value of Holding (as of September 30): $35.32 Million

Finally, even though its stock collapsed by more than 44% during the third quarter, the 29% boost that Brevan Howard made to its holding of energy company YPF SA (ADR) (NYSE:YPF) during the same period ensured that the company continued to remain the fund’s top stock pick by the end of September. On November 23, YPF shares declined by over 4% after the results of the Argentine presidential election came out and it was announced that pro-business candidate Mauricio Macri will be the next president of Argentina. YPF SA (ADR) (NYSE:YPF) had made a bid for Brazilian state-controlled Petrobras’ local assets in Argentina earlier in the year. However, it withdrew the bid in October citing Petrobras’ price expectations for those assets as being too high. For its most recent quarter ending September 30, YPF reported EPS of ARS 4.70 ($0.49) on revenue of ARS 40.93 billion ($4.23 billion), compared to the EPS of ARS 8.17 ($0.84) on revenue of ARS 38.21 billion ($3.95 billion) it had reported for the same quarter of last year. George Soros‘ family office Soros Fund Management held over 10 million shares of YPF SA at the end of September.

Disclosure: None