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Cryder Capital’s Top Picks Reveal the Fund’s Rather Cautious Strategy

Ferdinand GroosCryder Capital has revealed its equity holdings as of the end of the first quarter in a 13F form filed with the SEC. Three of the fund’s top five picks, including Westinghouse Air Brake Technologies Corp (NYSE:WAB), Alliance Data Systems Corporation (NYSE:ADS), and Roper Industries, Inc. (NYSE:ROP) are from the industrials sector, while the other two, BlackRock, Inc. (NYSE:BLK) and Monsanto Company (NYSE:MON) are financial and consumer discretionary stocks.

Wabtec Earnings

Cryder Capital’s Managing Partner Ferdinand Groos founded the London-based fund in December 2010. Groos has also served as a Managing Director of Rhone Capital L.L.C. The fund filed its first 13F form for the fourth quarter of 2014 and its new 13F filing revealed a 5% cut in all holdings during the first quarter and one new stake in Thermo Fisher Scientific Inc. (NYSE:TMO). The market value of the fund’s equity portfolio stood at $142.01 million with Information Technology and Industrial sectors representing 31% and 29% of the above value respectively. The portfolio comprised of a total of 13 holdings with top five stakes amassing more than 50% of the portfolio value.

Insider Monkey tracks hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of 6 basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of 7 basis points per month between 1999 and 2012. These stocks were able to generate alpha because of their lower risk profile. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month. These stocks were slightly riskier, so their monthly alpha was 80 basis points (read the details here). We believe investors will be better off by focusing on small-cap stocks rather than large-cap stocks.

After the sale of 9,281 shares of Westinghouse Air Brake Technologies Corp (NYSE:WAB), the size of Cryder’s largest holding stood at 165,917 shares valued at $15.76 million. The $9.25 billion provider of locomotive overhauls and fleet maintenance is up by about 13.49% year to date. The company delivered record Earnings per Share (EPS) of $0.99 in the first quarter, which were 19% on the year, while Westinghouse Air Brake Technologies Corp (NYSE:WAB)’s quarterly revenues also climbed by 18% to $819 million, primarily owing to growth in the Freight Group. Two other funds that piled up profits from Westinghouse Air Brake Technologies Corp (NYSE:WAB)’s stock appreciation this year are Mariko Gordon‘s Daruma Asset Management and Chuck Royce’s Royce & Associates, judging by their stakes in the company at the end of 2014.

Alliance Data Systems Corporation (NYSE:ADS) was Cryder’s largest holding in the fourth quarter, but a less stellar performance this year than Westinghouse Air Brake Technologies Corp (NYSE:WAB) has left it in the second place with 51,065 shares valued at $15.13 million. The provider of data-driven marketing and loyalty solutions completed its acquisition of Conversant, another digital marketing firm in December last year. Alliance Data Systems Corporation (NYSE:ADS)’s stock inched up by 7.79% year-to-date. Billionaire Ken Griffin decreased his exposure by 24% during the fourth quarter to 350,262 shares of Alliance Data Systems Corporation (NYSE:ADS) valued at $100.19 million.

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