Numerous sources and statistics recently indicated that hedge funds have been severely hit by the current volatile markets. Widely-known hedge fund managers, including Bill Ackman, Leon Cooperman and David Einhorn, have surely disappointed some of their investors with their poor performance since late last summer. However, plenty of hedge funds and investors believe that the massive selloff in U.S equities and other global stocks has created numerous investment opportunities at the moment, so hedge funds’ dynamic capital allocation strategies will prove to be crucial for their performance in the months ahead. For that reason, most individual investors might find it particularly interesting to see what moves successful money managers are making when many valuations are seriously damaged. And the best way investors can monitor hedge fund activity is to browse funds’ 13G, 13D, and Form 4 filings, which disclose up-to-date moves made by smart money investors. Let’s take a glimpse into the content of four such filings recently submitted with the SEC by money managers Joe Huber, Jeffrey Ubben of ValueAct Capital, and two other renowned managers.
Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).
A newly-amended 13G filing reveals that Huber Capital Management LLC currently owns 14.53 million Class A shares of Teekay Tankers Ltd. (NYSE:TNK), which make up 11.1% of the company’s outstanding common stock. That represents a greater than 5.00 million-share increase from the position revealed through the fund’s 13F filing for the September quarter. Teekay Tanker’s business mainly focuses on owning and operating crude oil and product tankers by utilizing a chartering strategy aimed at grasping upside opportunities in the tanker spot market. Crude tanker spot rates for the third quarter of 2015 were the highest third quarter rates since 2008 and continued to be robust through the end of the year. There are several factors that have strengthened the crude tanker market in recent months, which include soft fleet growth, high refinery throughput, improved earnings due to low bunker fuel prices, and high crude oil supply. However, JPMorgan recently downgraded Teekay Tankers Ltd. (NYSE:TNK) to ‘Underweight’ from ‘Overweight’ and trimmed its price target on the stock to $7 from $10, citing high exposure to the spot market and rich valuation.
The shares of Teekay Tankers enjoyed a great run last year, but they have lost more than 43% since the beginning of 2016. The oil tanker spot rates declined significantly in January, with analysts believing that the huge decline was caused by the overstocking of crude oil. Hence, it’s viable to expect that spot rates will recover in the forthcoming months due to depleting inventories. Meanwhile, the company looks extremely cheap at the moment if relying on several valuation metrics. For example, the stock trades at a forward P/E multiple of only 2.61, while that ratio stands at 9.37 for competitor Nordic American Tanker Ltd (NYSE:NAT). Ken Griffin’s Citadel Advisors LLC sold out its entire sake of 399,293 shares in Teekay Tankers Ltd. (NYSE:TNK) during the fourth quarter of 2015.
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Let’s head to the next two pages of this article, where we discuss three other recent filings submitted with the SEC.