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Billionaire Jacob Rothschild’s Stock Picking Performance Does Not Disappoint Despite Containing Some Losers

Billionaire Jacob Rothschild is a British investment banker and a member of the famous Rothschild banking family. Lord Rothschild serves as the Chairman of the London-listed investment trust RIT Capital Partners, which is widely-known in the finance industry for its exceptional track record and conservative approach to investing. The investment firm has rewarded its investors with a 12.4% return per annum since its inception in 1988, notably higher than broader market benchmarks. Moreover, the share price of RIT Capital Partners has generated a cumulative return of nearly 60% in the past three years (through the end of 2015). Data compiled by Insider Monkey shows that RIT Capital’s eight positions in companies with a market capitalization above $1 billion generated a weighted average loss of 1% in the first quarter of this year. Having this in mind, let’s have a look at five noteworthy positions that comprise the investment trust’s U.S. equity portfolio, as well as discuss the performance of those positions during the first quarter.

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5. Activision Blizzard Inc. (NASDAQ:ATVI)

– Shares Owned by RIT Capital Partners (as of December 31): 505,000

– Value of RIT Capital’s Holding (as of December 31): $19.54 Million

– Q1 Return: -11.9%

RIT Capital Partners acquired a new stake of 505,000 shares in Activision Blizzard Inc. (NASDAQ:ATVI) during the final quarter of 2015, which was worth $19.54 million on December 31. The new stake accounted for 5.25% of the investment trust’s U.S. equity portfolio at the end of December. The developer and publisher of online, PC, video game console, handheld, mobile and tablet games has seen product sales, which include the sale of physical products and digital downloads, decline steadily in the past several years. The company’s product sales declined to $2.45 billion in 2015 from $2.79 billion in 2014 and $3.21 billion in 2013. Nonetheless, Activision Blizzard’s sustained decline in physical sales has been more than offset by digital revenue growth due to higher player engagement. Total net revenues increased to $4.66 billion in 2015 from $4.41 billion in 2014. Moreover, analysts believe that the company’s ongoing transition from traditional video games to the digital game-play will lead to improved margins in the upcoming quarters. What’s more, cloud streaming and virtual reality may unlock new sources of revenue and growth for the interactive gaming company. Shares of Activision Blizzard lost nearly 12% during the first quarter of this year and are currently changing hands at around 16.1-times expected earnings, versus the forward P/E multiple of 17.9 for Electronic Arts Inc. (NASDAQ:EA) and 17.8 for Take-Two Interactive Software Inc. (NASDAQ:TTWO). Stephen Mandel’s Lone Pine Capital upped its stake in Activision Blizzard Inc. (NASDAQ:ATVI) by 22% during the fourth quarter of 2015, ending the year with 11.27 million shares.

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4. Alibaba Group Holding Ltd (NYSE:BABA)

– Shares Owned by RIT Capital Partners (as of December 31): 320,000

– Value of RIT Capital’s Holding (as of December 31): $26.00 Million

– Q1 Return: -2.8%

Billionaire Jacob Rothschild’s investment firm trimmed its stake in Alibaba Group Holding Ltd (NYSE:BABA) by 365,000 American Depositary Shares (ADSs) or 53% during the December quarter, ending 2015 with 320,000 ADSs valued at $26 million. Earlier this week, the world’s largest online and mobile commerce company announced that it had agreed to purchase a leading e-commerce company in Southeast Asia, called Lazada Group S.A., for roughly $1 billion. Lazada operates e-commerce platforms in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam; these six countries are said to have an estimated Internet user base of 200 million. Moreover, only 3% of this region’s retail sales are conducted online, so Alibaba’s recent acquisition unlocks massive growth potential as Internet penetration continues to grow. Alibaba’s revenue for the fourth quarter of 2015 reached $5.33 billion, which marked an increase of 32% year-on-year. Meanwhile, fourth-quarter mobile revenue was $2.89 billion, increasing by a whopping 192% year-over-year. At the same time, annual active buyers on the company’s China retail marketplaces reached 407 million, representing an increase of 21 million from the previous quarter. Alibaba has very little exposure to markets outside China, as less than 10% of its revenues come from abroad. Therefore, the recent acquisition marks an important step for the company’s global expansion strategy. Alibaba’s ADSs are down 4% since the beginning of 2016. Rob Citrone’s Discovery Capital Management reported owning 10.60 million ADSs of Alibaba Group Holding Ltd (NYSE:BABA) through the round of 13Fs for the December quarter.

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3. eBay Inc. (NASDAQ:EBAY)

– Shares Owned by RIT Capital Partners (as of December 31): 1.27 Million

– Value of RIT Capital’s Holding (as of December 31): $34.75 Million

– Q1 Return: -13.2%

Lord Rothschild’s London-listed investment trust cut its exposure to eBay Inc. (NASDAQ:EBAY) by 489,000 shares or 27% during the fourth quarter of 2015. The investment trust owned almost 1.27 million shares of eBay on December 31, which were aggregately worth $34.75 million. The online auction giant has been struggling to gain market share in the e-commerce market, even after completing the highly-scrutinized Paypal Holdings Inc. (NASDAQ:PYPL) spin-off. eBay continues to face mounting competition from other massive players such as Amazon.com Inc. (NASDAQ:AMZN), but recent announcements suggest that the company intends to keep fighting for market share in the fast-growing e-commerce market. Earlier this month, eBay announced plans to launch a branded supplies store, which will sell eBay-branded eco-friendly boxes, envelopes and tape. Although this initiative may not add too much to the company’s top-line figure, most analysts believe that shipping supplies would assist eBay in creating a brand appeal for the company. Specifically, this move may allow eBay to reshape its current “second-hand” image into a high-class products marketplace. The global commerce leader’s total net transaction revenues for 2015, which accounted for 79% of total revenues, decreased 2% year-on-year to $8.59 billion due to foreign currency headwinds. eBay shares have declined 12% since the start of the year and trade at 11.8-times expected earnings, significantly below the forward P/E ratio of 17.4 for the S&P 500 Index. Iridian Asset Management, founded by David Cohen and Harold Levy, acquired initiated a new stake of 7.44 million shares in eBay Inc. (NASDAQ:EBAY) during the October-to-December period.

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2. Walt Disney Co (NYSE:DIS)

– Shares Owned by RIT Capital Partners (as of December 31): 481,800

– Value of RIT Capital’s Holding (as of December 31): $50.62 Million

– Q1 Return: -5.5%

RIT Capital Partners had 481,800 shares of Walt Disney Co (NYSE:DIS) in its equity portfolio at the end of December, 27,200 shares less than at the end of the third quarter. The former stake was value at almost $50.62 million on December 31. Shares of Walt Disney are 8% in the red year-to-date, as the company has been facing numerous challenges lately. Some analysts believe that Walt Disney’s shares have been mostly weighted by cord cutting, as cord-cutting trends have triggered a wave of concerns across the entire media landscape. Just recently, Chief Operating Officer and heir apparent Tom Staggs announced he would be leaving the company, which might serve a distraction for the company’s top-tier management in the upcoming future. Mr. Staggs was the expected successor to current Chief Executive Officer Bob Iger, who is stepping down from his role in June 2018. After the somewhat surprising announcement, many believe Walt Disney will have to look for external CEO candidates. Just recently, analysts at RBC Capital Markets initiated coverage on Walt Disney with a ‘Sector Perform’ rating and a price target of $103, which yields an upside of only 7%. Shares of Walt Disney are currently trading around 15.4-times expected earnings, above the forward P/E ratio of 14.3 for the movies and entertainment industry. Lansdowne Partners, overseen by Alex Snow, had 8.24 million shares of Walt Disney Co (NYSE:DIS) in its equity portfolio at the end of 2015.

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1. Colgate-Palmolive Company (NYSE:CL)

– Shares Owned by RIT Capital Partners (as of December 31): 1.04 Million

– Value of RIT Capital’s Holding (as of December 31): $69.02 Million

– Q1 Return: 6.7%

Colgate-Palmolive Company (NYSE:CL) was RIT Capital’s largest equity position at the end of 2015, comprised of nearly 1.04 million shares. The London-listed investment firm trimmed its stake in the company by 46,700 shares during the December quarter, with the “quarter-end” position accounting for 18.55% of the fund’s equity portfolio. Colgate-Palmolive is a widely-known consumer products company that sells various products across the entire globe. The company conducts its business operations through two product segments: Oral, Personal and Home Care; and Pet Nutrition. Colgate-Palmolive’s worldwide net sales totaled $16.03 billion in 2015, which decreased 7% year-on-year. The company’s volume growth of 1.5% and net selling price increases of 3% were more than offset by the negative impact of foreign exchange headwinds. Organic sales, which exclude the impact of foreign exchange, acquisitions and divestitures, reached a growth rate of 5% in 2015. Colgate-Palmolive is a member of the exclusive list of Dividend Kings, which represent companies that have increased annual dividend payments for more than 50 consecutive years. The company pays out an annualized dividend of $1.52 per share, which equates to a current yield of 2.1%. Colgate-Palmolive has seen its market capitalization gain 6% since the beginning of 2016, while its shares are currently trading at a rich forward P/E ratio of 23.6 relative to the broader market. However, the company’s forward P/E valuation multiple is much lower than the forward P/E ratio of 27.4 for the personal products industry. Jim Simons’ Renaissance Technologies owns 10.06 million shares of Colgate-Palmolive Company (NYSE:CL) as of the end of the fourth quarter of 2015.

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Disclosure: None