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Nehal Chopra

Diversification has been a buzzword in the investment industry for a long time. However, many retail investors still don’t utilize it enough as a fundamental strategy that can help them to reduce the overall risk in their portfolios. They think diversification restricts them from generating superior returns by not allowing them to bet heavily in stocks they perceive as future strong performers. Such critics of diversification were proven wrong big time last year. While the broader market delivered flat returns for 2015, several investors and funds with concentrated portfolios ended the year with large losses because the few stocks they were invested in turned out to be duds. One such fund was Nehal Chopra’s Ratan Capital Group. According to Bloomberg, Ratan Capital Group’s flagship fund, Tiger Ratan, ended 2015 with a loss of 19%. However, Insider Monkey’s own analysis of the fund’s 13F holdings shows that the long positions held by Ratan Capital Group during 2015, in companies worth over $1 billion, delivered a weighted average return of 3.1% for the year. The reason those two return figures differ drastically is because we don’t include a fund’s investments in bonds, currencies, derivatives, currencies or its short positions in our calculations. It does however show that Ratan’s long stock picks performed fairly well, while other aspects of its portfolio were suspect. With that in mind, we’ll take a look at Ratan Capital’s biggest moves (and one non-move) in its long positions during the fourth quarter, according to its recent Form 13F filing with the SEC.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. Our researched showed that imitating the 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

Nehal Chopra
Nehal Chopra
Ratan Capital Group

Let’s start with Valeant Pharmaceuticals Intl Inc (NYSE:VRX), a stock which Ratan Capital Group sold off during the fourth quarter. Valeant Pharmaceuticals Intl Inc (NYSE:VRX)’s stock plummeted heavily between August and October of last year, which was one the main reasons behind Tiger Ratan’s poor overall performance in 2015. This year, the company has lost another 20% of its capitalization. Valeant Pharmaceuticals is expected to report its fourth quarter earnings early next week and analysts anticipate that it will report EPS of $2.61 on revenue of $2.75 billion. For the same quarter of the preceding year, the company reported EPS of $2.58 on revenue of $2.28 billion. On February 25, analysts at Canaccord Genuity reiterated their ‘Buy’ rating and $170 price target on Valeant, suggesting greater than 100% upside potential. Bill Ackman‘s Pershing Square, which also suffered greatly in 2015 under the weight of a Valeant Pharmaceuticals Intl Inc (NYSE:VRX)position, reduced its stake in the stock by 15% to 16.6 million shares during the fourth quarter. International, Ltd. (ADR) (NASDAQ:CTRP) was a new addition to Ratan Capital Group’s equity portfolio during the fourth quarter, as the fund bought 650,000 shares of the company valued at $30.12 million as of December 31. Despite the rout in the Chinese equity markets this year, International, Ltd. (ADR) (NASDAQ:CTRP) is trading down by only 9.8% year-to-date, which shows investors’ conviction in the stock. Most analysts believe that even though hard times await the Chinese economy going forward, travel spending in China will nonetheless continue to grow and will be a major beneficiary of that. Analysts also think that when taking into account the projected growth of the industry, the company’s stock is undervalued right now, trading at a trailing enterprise-value-to-revenue multiple of only 5.72. Yi Xin‘s Ariose Capital also initiated a stake in International, Ltd. (ADR) (NASDAQ:CTRP) during the fourth quarter, purchasing 319,488 shares.

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