After years as one of Mercer International Inc. (NASDAQ:MERC)’s top shareholders, it appears that Kerr Neilson’s Platinum Asset Management is beginning to divest itself of its once formidable amount of shares in the company. In a recent filing with the SEC, Platinum reported ownership of 4,653,657 shares, which accounted for 7.2% of Mercer International’s common stock.
While still significant, that figure is down more than 2 million from the 6,846,979 shares they reported in their most recent 13F filing on September 30, which itself was down more than 1 million shares from the 7,900,171 they reported on June 30. All told, they’ve cut their stake in the company nearly in half over the last half a year, from 14.1% ownership, to 7.2%.
The Australian-based Platinum Asset Management has been a long time, non-activist investor of Mercer International, acquiring much of their position in the company in 2006 and early 2007, when they increased their ownership from 5.1% (1.69 million shares) to 15.4% (5.10 million shares) in less than a year.
That long-term strategy was consistent with their overall investment strategy, which has included long term ownership of both Foster Wheeler AG(NASDAQ:FWLT) and Microsoft Corporation (NASDAQ:MSFT), though they let go of much of their Microsoft stock in the early stages of its current ascent, in 2013. In the case of Mercer, their long-term investment has paid only moderate dividends; Mercer is up just 6.4% since the beginning of January, 2007.
Platinum’s current top picks include Intel Corporation (NASDAQ:INTC), with 11,562,300 shares worth just over $400 million, Alcoa Inc (NYSE:AA), with 18,995,962 worth just over $300 million, and Carnival Corp (NYSE:CCL), with 7,151,900 worth $287 million.
Despite moderate growth over the past 8 years, Mercer International Inc. (NASDAQ:MERC), a Canadian producer of market northern bleached softwood kraft (NBSK) pulp, has seen a much stronger uptick within the past few months, rising 5.98% in the last month, and 22.71% during the past 3 months. Their most recent earnings report for Q3 2014 came in ahead of analysts estimates with $1.37 earnings per share, thanks to reduced costs, though revenue came in below estimates at $277 million.
The consensus on the stock among analysts is a hold rating, with an average price target of $12.20, slightly below their Friday afternoon trading price of $12.60. Zack’s and RBC Capital both have outperform ratings on the stock and price targets of $13.20 and $15.00 respectively, while TD Securities has them rated a hold, with a $9.50 price target. Mercer will announce their Q4, 2014 earnings on February 12.
Platinum’s diminishing position in Mercer International Inc. (NASDAQ:MERC) leaves Jeffrey Gates’ Gates Capital Management as far and away the largest private shareholder in the company. Gates Capital Management has steadily built their position in Mercer since 2012, adding to their position in every single quarter since the middle of 2012. As of their most recent 13F filing, they owned 12,349,764 shares in the company. Like Platinum, Gates Capital Management also has a non-activist position on Mercer. Other major shareholders of Mercer include Tom Wagner and Ara Cohen’s Knighthead Capital with 3,343,374 shares, and Joe Huber’s Huber Capital Management with 2,503,388 shares.
It will be interesting to see if the Platinum Asset Management sell-off of Mercer continues, which could indicate that they feel Mercer has effectively peaked, or whether they were simply taking some profit from their investment and moving it into something else. Platinum Investment has returned 12.4% since 2011, beating the benchmark world index by nearly 9 percentage points.