Keith Meisler Raising Signet Jewelers Ltd. (SIG) Holding, And His Other Top Picks

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Keith Meister‘s Corvex Capital has increased its activist stake in Signet Jewelers Ltd. (NYSE:SIG), according to a recent 13D filing with the Securities and Exchange Commission. The fund now owns 5.75 million shares of the Bermuda-based company, versus 5.51 million disclosed earlier. F0llowing the increase, the stake represents 7.2% of the company’s outstanding shares.

Keith Meister

Corvex is a relatively new fund established in 2011 with $250 million in seed capital from the renowned investor George Soros. Meister plays out well his role as an activist investor. Similar to his mentor, Carl Icahn, Mr. Meister is not afraid to call for extreme measures such as replacement of the entire board, or changing the management of a company  if the need be, to accomplish his activist aims. In fact Corvex Management along with Related Cos. changed the entire board of CommonWealth REIT last year. The market value of the fund’s equity portfolio stands at $8.15 billion, with the energy sector contributing 28% to it and finance another 20%, according to the latest 13F filing. Most valuable holdings are represented by Williams Companies Inc (NYSE:WMB), Fidelity National Financial Inc (NYSE:FNF) and Signet Jewelers Ltd. (NYSE:SIG).

The cost of benefitting from the investment prowess of great money managers like Meister is not a small one. Hedge funds can charge from 30% to 80% of the profits as fees, depending on how well the firm does and how the fees are structured. In our endeavor to help investors avoid these costs, we have formulated a strategy that is focused on most popular small-cap picks among hedge funds. In backtests for the period between 1999 and 2012, we discovered that a portfolio of the most popular stocks among hedge funds underperformed the market by around 7 basis points per month. This is not surprising, since the majority of hedge funds prefer to invest in large-cap stocks, which are more efficiently priced. On the other hand, a portfolio of 15 most popular small-cap stocks among hedge funds managed to outperform the market by nearly 1.0 percentage points per month during the same period. As far as forward tests are concerned, the same small-cap strategy beat the market by 79.4 percentage points in the last 2.5 years and returned around 132% (read the details here).

Moving on to Corvex’s largest holding, represented by Williams Companies Inc (NYSE:WMB), which amasses 22.98% of the fund’s portfolio and contains 41.68 million shares valued at $1.87 billion. Meister was also appointed to Williams’ Board of Directors in November last year. The stock of the $36.3 billion company is up by about 21.32% over the last year. In contrast, the S&P 500 only gained 10.4% during the same time period. Among the billionaires that we track at Insider Monkey, eight held long positions in Williams Companies Inc (NYSE:WMB), totalling $978.16 million towards the end of the fourth quarter. Dan Loeb is one of them, as his fund, Third Point, holds some 4.0 million shares valued at $179.76 million, according to its latest 13F filing.

Williams Companies Inc (NYSE:WMB) offers a particularly high dividend yield of 4.7%, and its recently merged Master Limited Partnership, Williams Partners L.P. (NYSE:WPZ) offers a 6.9% yield as compared to S&P 500’s 1.91%. The yield also puts the company among the hedge funds’ top dividend stock picks. After the completion of the merger between Williams Partners and Access Midstream Partners in February this year, the company has become one of the largest operators of gas pipelines in the US. The future growth outlook for the company also looks promising as it plans to invest nearly $9 billion in the next two years.

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