Brookside Capital is a hedge fund founded by several Bain Consulting employees in the 1980s, as a mechanism to provide investors with direct profit from the management skills they had acquired at Bain. Brookside is a subsidiary of Bain Capital and invests in most sectors of the economy. However, its portfolio, worth more than $4.1 billion, has a slight focus on consumer discretionary stocks (31.6%). In this article we will take a look at the fund’s top new positions for the second quarter of 2014: Cisco Systems, Inc. (NASDAQ:CSCO), Twitter Inc (NYSE:TWTR) and Signet Jewelers Ltd. (NYSE:SIG).
Brookside’s largest new bet was placed on Cisco Systems, Inc. (NASDAQ:CSCO), which now is the fund’s second most valuable equity position. Over the second quarter of the year, this $128.4 billion market cap communications and information technology (IT) company saw the fund acquire 7.21 million shares of Common Stock, worth more than $179 million. This stake accounts for roughly 4.3% of Brookside’s equity portfolio’s total value. Much larger is Donald Yacktman’s stake. His fund, Yacktman Asset Management, holds 62.28 million shares of the company, with a market value of more than $1.54 billion.
During the second quarter of 2014, Cisco Systems, Inc. (NASDAQ:CSCO) acquired Tail-f Systems, a Swedish virtualization startup, for $175 million, looking to strengthen its cloud-services portfolio. This bodes well for the company’s penetration in the telecom services segment. In addition, Cisco pays out a generous dividend yield, projected above 3% going forward.
Twitter Inc (NYSE:TWTR) is another newcomer to Brookside’s equity portfolio. The fund purchased 3.6 million shares of the renowned Internet company, and now owns roughly $150 million in stock. Another major fund betting on Twitter Inc (NYSE:TWTR) is John Thaler’s JAT Capital Management which, after a 441% increase of the stake, owns 7.32 million shares of the company’s Common Stock.
As Brookside invested in Twitter Inc (NYSE:TWTR), the company experimented with several new features to continue to attract users, and prevent its growth rate from decelerating. During the second quarter, the company particularly benefited from the FIFA World Cup in Brazil, and all of the talk around it.
Signet Jewelers Ltd. (NYSE:SIG) is the third company in this list. Over the second quarter, the fund bought 1.25 million shares, worth roughly $139 million, of the $9.4 billion market cap jewelry retailer – in the U.S. and U.K. Other major hedge funds disclosed even larger stakes in Signet Jewelers Ltd. (NYSE:SIG) . Keith Meister’s Corvex Capital last disclosed ownership of 5.63 million shares, worth more than $622 million.
Several pieces of news might have motivated Brookside’s purchase. Signet Jewelers Ltd. (NYSE:SIG) completed, over the second quarter, Zale Corporation; this made it one of World’s largest jewelry retailers, with more than $6 billion in sales. In addition, the Board announced a regular quarterly cash dividend of $0.18 per Common Share.
Disclosure: Javier Hasse holds no position in any stocks or funds mentioned.