Nehal Chopra’s Ratan Capital Group has been one of the most successful hedge funds over the past two years, posting net returns of 22.3% in 2014 when the average hedge fund manager earned just 3.6%. That followed an even more impressive 2013 when her fund returned an outstanding 46.8%. One of the key cogs in her high returns is Charter Communications, Inc. (NASDAQ:CHTR), which she has held since her fund’s first 13F filing for the end of 2012. Throughout the following two years, shares have risen by over 125%, while she’s also continued to increase her position in the stock, from the 110,000 shares reported initially, up to 472,700 at the end of 2014, which was a 38% increase from the end of the third quarter.
Chopra’s investment in Charter Communications, Inc. (NASDAQ:CHTR) continues to pay off, as the cable company announced this morning the acquisition of privately-held Bright House Networks for $10.4 billion in cash and stock. News of the deal sent shares of Charter soaring over 7% in intraday trading on Tuesday, which leaves them up by over 18% year-to-date. The deal isn’t totally unexpected, as rumors first surfaced on March 12 that Charter Communications, Inc. (NASDAQ:CHTR) was seeking to purchase Bright House, which caused the stock price gain around 6%.
The purchase of Bright House, the sixth-largest cable operator in the United States, is expected to propel Charter from being the fourth-largest itself, to the second-largest. The deal is a nice consolation prize for Charter after it failed in its attempts to purchase Time Warner Cable Inc (NYSE:TWC) last year, which was eventually sold to Comcast Corporation (NASDAQ:CMCSA). Despite that failure, the company might score big if it manages to pick up more than a million customers that Comcast and Time Warner would be forced to drop to satisfy antitrust regulators, which was cited as a likely reason Warren Buffett continues to back Charter.
Buffett has a position of 6.20 million shares as of the end of 2014, while John H. Scully’s SPO Advisory Corp is the largest shareholder among the funds we track, with 7.57 million shares. However, while Chopra does not have even close to the largest investment in Charter Communications, Inc. (NASDAQ:CHTR) in terms of the number of shares held, she does have the largest holding in terms of portfolio exposure, the holding amassing 22.51%.
Chopra in fact has just five long positions as of the end of 2014, after closing another five previously-held long positions during the fourth quarter. Charter reppresented the third-most valuable of those, worth $78.76 million. The largest holding is represented by Actavis plc (NYSE:ACT), in which she has a position of 393,800 shares worth $101.36 million. Chopra again has the largest position among the funds we track in terms of portfolio allocation, at 28.97%, though billionaires Andreas Halvorsen and Dan Loeb have the largest stakes that contain 4.59 million and 3.45 million respectively.
Actavis plc (NYSE:ACT) has been another very successful play by Chopra, gaining just under 50% since the end of the first quarter of 2014, when she first reported a position in the specialty pharmaceutical company. Actavis said last month that it would change its name to Allergan after the merger of both companies is completed. Analysts are still extremely bullish on Actavis plc (NYSE:ACT)’s stock, with Zacks upgrading it to a “Strong Buy” on Friday with a $347 price target, while RBC Capital yesterday raised its price target on the stock to $361 from $330. The latter price target puts nearly a 20% upside on the stock, which is trading at $301.34 in afternoon trading on Tuesday.
Chopra’s second top pick is Valeant Pharmaceuticals Intl Inc (NYSE:VRX), in which she holds a position of 688,400 shares valued at $98.51 million and which constitutes 28.16% of her portfolio. Another shareholder of the company is Glenn Greenberg’s Brave Warrior Capital, which holds a 6.13 million share position that accounts for 30.52% of its equity portfolio. The top shareholder meanwhile as of the end of 2014 is Jeffrey Ubben’s ValueAct, which holds 19.38 million shares.
However, Pershing Square, a fund led by notorious activist Bill Ackman, just recently disclosed a new 19.47 million share position in aleant Pharmaceuticals Intl Inc (NYSE:VRX), vaulting it past ValueAct. Ackman also intends to have discussions with Valeant Pharmaceuticals Intl Inc (NYSE:VRX) concerning its planned purchase of Salix Pharmaceuticals, as was revealed in the contents of a letter agreement from Valeant Pharmaceuticals Intl Inc (NYSE:VRX) which the investor also disclosed in the filing. Shares of Valeant have skyrocketed over the past two-plus years, and are up another 40% year-to-date following news of the Salix purchase.
While Chopra’s fund has produced outstanding returns which have continued into 2015, our small-cap strategy actually outperformed it in both 2013 and 2014 (and without the large fees that hedge fund managers charge for their services). We developed the strategy after exhaustive research into ways investors could benefit from the activity of hedge funds. What we found through backtesting is that a collection of the top 15 small-cap stocks collectively owned by a select group of hedge funds greatly outperformed the market between 1999 and 2012, with average monthly returns of 127 basis points during the three month holding period that begins two months after the end of each quarter. In comparison, the S&P 500 Total Returns Index had an average monthly gain of just 32 basis points. In forward testing since the strategy was launched in August 2012, it has continued to excel, outperforming the market by nearly 80 percentage points over its first 2.5 years and generating returns of 132% (read more details about our small-cap strategy).