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Emerging Sovereign Group Shuffles Top Positions In Bid To Recover Losses

Emerging Sovereign Group was founded in 2002 by Kevin Kenny, Mete Tuncel and Jason Kirschner, who previously worked together at Morgan Stanley, with seed money from Tiger Management founder, Julian Robertson. Since then, the fund has grown to manage approximately $3.5 billion worth of assets, with $1.45 billion invested in public equity. At the end of the second quarter, consumer staples stocks accounted for 42% of Emerging Sovereign Group’s equity portfolio, while investments in the technology sector amounted to 25% of the portfolio.

The Carlyle Group, which took over the fund in 2011, has decided to unwind its holding as it aims to focus more on credit-oriented investments. The partners of Emerging Sovereign Group LLC have agreed to buy back a majority package. Emerging Sovereign Group focuses on investment opportunities in emerging markets and also employs macroeconomic strategies. According to a report by Bloomberg, the firm has two main strategies that account for 90% of its investments: the Cross Border Equity Strategy, which is down roughly 7% so far this year, and the Domestic Opportunity Strategy.

Hedge fund sentiment is an important metric for assessing long-term profitability. At Insider Monkey, we track over 745 hedge funds, whose quarterly 13F filings we analyze to determine their collective sentiment towards several thousand stocks. However, our research has shown that the best strategy is to follow hedge funds into their small-cap picks. This approach can allow monthly returns of nearly 95 basis points above the market, as we determined through extensive backtests covering the period between 1999 and 2012 (read more details here).

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J Kevin Kenny Jr
J Kevin Kenny Jr
Emerging Sovereign Group

Constellation Brands Still A Buy

Opening Emerging Sovereign Group’s top 5 is Constellation Brands, Inc. (NYSE:STZ). Kevin Kenny and his team have boosted their investment by 19% to 606,831 shares worth a little over $100 million at the end of the quarter. Hedge fund interest in Constellation Brands, Inc. (NYSE:STZ) cooled down a bit during the second quarter, as the number of fund invested fell to 69 at the end of June, from 71 at the end of March. Billionaire Dan Loeb is also bullish on this stock, having increased his fund’s position by 14% to exaclty 2 million shares worth $331 million. In a bid to spur growth, Constellation Brands, Inc. (NYSE:STZ) has decided to enter the highly-lucrative craft beer industry. The company has completed the acquisition of Ballast Point Brewing & Spirits in December 2015, in a deal valued at $1 billion. Ballast Point is one of the fastest-growing companies in the industry and boasts a depletion rate (sales from distributors to retailers) of more than 60%. Using Constellation Brands’ extensive distribution network, Ballast Point, based in California, has started expanding towards the east coast, having announced in May the opening of a brewery in Virginia. Being one of the fastest-growing craft brewer, surely Ballast Point will continue to expand its portfolio despite a current slowdown in the industry.

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Bullish On Alibaba

Next up is Alibaba Group Holding Ltd (NYSE:BABA), a new addition to Emerging Sovereign Group’s equity portfolio. Over the course of the second quarter, the management team amassed approximately 1.42 million shares valued at $113 million according to the fund’s recent 13F filing. Alibaba Group Holding Ltd (NYSE:BABA) registered a boost in popularity among the funds tracked by Insider Monkey, with the number of long hedge fund positions having increased to 69 by the end of the second quarter, from 67 registered three months earlier. Eric Mindich‘s Eton Park Capital was also among the funds that initiated a stake in the e-commerce giant during the quarter, having amassed 1.16 million shares, reportedly worth $92.1 million. JPMorgan Chase & Co. have recently shuffled the analysts covering Chinese stocks and the new analyst handling Alibaba Group Holding Ltd (NYSE:BABA) is upbeat about the prospects of the company. The firm has an ‘Overweight’ rating on the stock and has assigned a price target of $135 per share, up from the previous target of $129 per share. According to a note to investors, JPMorgan sees solid growth opportunities in the e-commerce and cloud computing divisions.

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Turn over the page to read about Emerging Sovereign Group’s tree largest positions at the end of June.

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