GrubHub Inc. (GRUB)’s Insatiable Appetite for Gains Feeds Pelham Capital’s Whopper of a Quarter

Another quarter has come and gone and Insider Monkey has poured through the data to create an exhaustive list of the performance of the 749 hedge funds in our system which filed 13Fs for the June quarter. We’ll be releasing a series of articles in the coming weeks looking at the absolute cream of the crop among fuinds during the third quarter and analyzing the picks that drove their returns to new heights.

Ross Turner‘s Pelham Capital is one of those funds, and it sure picked the right stock to have most of its resources in during the third quarter. On June 30, Pelham Capital had seven long positions in stocks with a market cap of $1 billion and those stocks delivered weighted average returns of 33.4% during the quarter, based on the size of those positions, which ranked it as the fifth-best performing hedge fund in our database during the quarter using that criteria. That was mostly due to the performance of GrubHub, which accounted for 85.05% of the value of the fund’s public equity portfolio at the end of June.

However, it should be noted that the actual returns of Pelham Capital could be quite different than what we calculated, as short positions and other some other investement positions are not reported on 13F forms. Furthermore, the long positions themselves can undergo changes during the quarter, as evidenced by Pelham Capital’s own filing for the third quarter, which shows that it closed out three of those seven positions during the quarter. Nonetheless, as Pelham Capital’s position in GrubHub was left unchanged and now accounts for 91.14% of its portfolio’s value, we at least have a good idea that our calculations of the performance of its long picks is not off by much.

Let’s proceed with a discussion of Pelham Capital’s four main positions and check out their performance of late.

As mentioned, GrubHub Inc. (NYSE:GRUB) was by far the most valuable position held by Pelham Capital throughout the third quarter, which is why its 38% returns during the period helped carry it to a hearty performance. GrubHub Inc. (NYSE:GRUB) has not been quite as lucky in the fourth quarter, as its latest earnings report showed that active diner growth has slowed.

GrubHub Q3 16 Chart

As you can see in the chart, hedge funds timed their move into GrubHub Inc. (NYSE:GRUB) perfectly in Q2, as 3.35% of the funds in our database were shareholders of the stock on June 30, up from 3% a quarter earlier. Melvin Capital Management, managed by Gabriel Plotkin, assembled the most outsized position in GrubHub, with $27.2 million invested in the company at the end of the second quarter. Curtis Macnguyen’s Ivory Capital (Investment Mgmt) also made a $14.3 million investment in the stock during the quarter. Some of the other funds with new positions in the stock were Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital, Siddharth Thacker’s Signpost Capital, and Neil Chriss’ Hutchin Hill Capital.

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Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK) was Pelham Capital’s second-most valuable holding on June 30, worth $7.78 million. However, the fund sold out of the position at some point during the third quarter, so we can’t be certain how much of the stock’s 15% gains during the quarter that Pelham Capital actually benefited from. Shares of the company are up by over 1% in after-hours trading today after it reported that subscribers additions growth stood at an impressive 35% year-to-date.
Heading into the third quarter of 2016, a total of 60 of the hedge funds tracked by Insider Monkey held long positions in the Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK). Boykin Curry’s Eagle Capital Management had the biggest position in Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK) on June 30, worth close to $1.02 billion. On Eagle Capital Management’s heels was John H. Scully of SPO Advisory Corp, with a $797.7 million position. Remaining members of the smart money that held long positions encompassed First Eagle Investment Management, Lou Simpson’s SQ Advisors, and John Ku’s Manor Road Capital Partners.

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We’ll check out two other stocks held by Pelham Capital on the next page.

Next up is Visa Inc. (NYSE:V), the third-most valuable holding in Pelham’s portfolio at the end of the second quarter, valued at $5.04 million. Pelham Capital left the position unchanged during the third quarter and it rose in value to $5.62 million, or over 10%. The announcement yesterday that Visa Inc. (NYSE:V) would cut an undisclosed number of jobs did not aid the stock, which has lost 2% this week. Shares are up by 4% year-to-date.

Heading into the third quarter of 2016, a total of 118 of the hedge funds tracked by Insider Monkey held long positions in this stock, a rise of 11% from one quarter earlier. Fisher Asset Management, managed by Ken Fisher, holds the number one position in Visa Inc (NYSE:V) valued at $1.13 billion in stock at the end of June. The second-most bullish fund manager was Warren Buffett of Berkshire Hathaway, with a $759.4 million position. Remaining professional money managers that were bullish contained Alex Snow’s Lansdowne Partners, Stephen Mandel’s Lone Pine Capital, and Eric W. Mandelblatt’s Soroban Capital Partners.

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Lastly is Vantiv Inc (NYSE:VNTV), in which Pelham Capital owned 65,500 shares valued at $3.71 million on June 30. As of September 30, Pelham has hiked its stake in the stock to 96,000 shares, which are worth $5.40 million. Vantiv Inc (NYSE:VNTV) ended the third quarter down slightly, but has rallied in the last two weeks following its latest earnings results being released. Its revenue of $491 million and EPS of $0.71 both topped estimates.

Heading into the third quarter of 2016, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in Vantiv, up from 27 at the end of March. Their collective positions in the stock also rose in value during the second quarter, ending the period valued at $570 million, up from $524 million at the start of the quarter. Ric Dillon’s Diamond Hill Capital had the biggest position in Vantiv Inc (NYSE:VNTV) at the end of June, worth close to $231.5 million, and comprising 1.5% of its 13F portfolio’s value.

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