Gerdau SA (ADR) (NYSE:GGB) also managed to get Jon Bauer’s attention, as Contrarian Capital bought some 3.22 million shares over the course of the quarter, a position worth $5.86 million at the end of June. Hedge fund interest in Gerdau SA (ADR) (NYSE:GGB) picked up during the quarter, as the number of long positions increased to 13 at the end of June from 10 registered three months earlier. Jim Simons’ Renaissance Technologies held the largest stake in the company among the funds tracked by Insider Monkey, having indicated ownership of 17.3 million shares, up 77% from the previous quarter. Analysts are also optimistic about the prospects of Gerdau SA (ADR) (NYSE:GGB), as the stock carries a forward Price to Earnings (P/E) ratio of 20. Morgan Stanley has recently upgraded the stock to ‘Overweight’ from ‘Equal Weight’ and has assigned a price target of $3.77 per share. Given Monday’s closing price of $2.84 per share, this implies an upside potential of roughly 33%. The firm said it expects Brazil’s economy to register a modest 0.9% growth in 2017 but believes it will be enough to trigger a double-digit growth in demand for steel. “Gerdau has the strongest balance sheet in the Brazilian steel industry. Strong free cash flow generation (R$4.5 billion in 2016-18e), combined with solid cash position (R$4.9 billion as of 2Q16), should allow the company to comfortably meet debt maturities in coming years,” wrote Morgan Stanley, as quoted by Barron’s.
Jon Bauer and his team are betting big on Vale SA (ADR) (NYSE:VALE), the world’s largest producer of iron ore based in Brazil. According to its latest 13F filing, Contrarian Capital held 3.35 million shares at the end of the second quarter, worth a little over $16.2 million. Hedge fund sentiment towards Vale SA (ADR) (NYSE:VALE) worsened during the quarter, with the number of funds invested in the company having dropped to 24 by the end of June from 26 at the end of March. Ken Heebner is also optimistic about the prospects of this stock, with his fund, Capital Growth Management, reportedly holding 7 million shares, up 126% during the quarter. Vale SA (ADR) (NYSE:VALE) has found itself in hot water at the end of 2015, after one of its co-ventures, Samarco Mineração SA, was shut down in November after a dam burst, causing a major environmental disaster. In a recent presentation, Vale SA said it is not clear when operations at Samarco Mineração will resume and it plans to work in improving efficiency and cash flow to offset the losses. After trading close to all-time lows at the end of January, the stock turned around and headed north, currently up by 75% for the year.
Oil Recovery To Boost Demand For Tankers
Jumping straight to number 2 is Overseas Shipholding Group, Inc. Class A (NYSE:OSG). Contrarian Capital has reported a $23.7 million stake in its latest 13F filing, as it gathered roughly 2.15 million shares of the oil tanker operator. In general, the hedge funds followed by Insider Monkey tended to stay away from this stock, as the number of long positions fell to 15 by the end of the second quarter, from 19 registered a quarter before. Billionaire Ken Griffin is also betting on the comeback of Overseas Shipholding Group, Inc. Class A (NYSE:OSG). His fund, Citadel Investment Group, also reported a new position, having amassed 1.37 million shares worth $15.1 million according to its latest regulatory filing. For the second quarter, the company reported an 8% decrease in Time Charter Equivalent (TCE) revenues to $216 million and $0.31 in earnings per share, down from $0.60 per share reported a year before. Overseas Shipholding Group, Inc. Class A (NYSE:OSG) is planning to separate its international operations from the domestic ones, as it believes it will help increase shareholder value. Of the 79 vessels it currently owns, 55 are operating in the international flag market, while the remaining 24 are focusing on the US market.