O’Keefe Stevens Advisory Inc., an asset management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. At the end of 2021, the fund’s top 5 holdings represented almost 41% of its assets. As of December 15th, the Russell 3000 Index, which tracks the performance of the 3,000 largest US-traded securities, was 3.4% off its all-time high. 2,288 (76.2%) of the index was 10% or more off its all-time highs, 1,068 (30% of the index) was more than 30% off its all-time high, and 559 (18.6% of the index) was more than 50% off its all-time high. The mega-cap names, including Apple, Google, Amazon, Nvidia, and others, have kept the market up due to their significant index weight. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
O’Keefe Stevens Advisory, Inc., in its Q4 2021 investor letter, mentioned Teekay LNG Partners L.P. PFD UNIT SER A (NYSE: TGP-PA) and discussed its stance on the firm. Teekay LNG Partners L.P. PFD UNIT SER A is a Bermuda-based marine energy transportation, storage & production company with a $2 billion market capitalization. TGP-PA delivered a -0.79% return since the beginning of the year, while its 12-month returns are down by -1.68%. The stock closed at $25.16 per share on January 31, 2022.
Here is what O’Keefe Stevens Advisory, Inc. has to say about Teekay LNG Partners L.P. PFD UNIT SER A in its Q4 2021 investor letter:
“Teekay LNG (TGP) – On October 4th, Teekay LNG announced they were being acquired by Stonepeak, an Alternative Investment firm specializing in infrastructure and real assets, for $6.2B, or $17 per share. Teekay LNG is one of the largest operators of LNG vessels. We were displeased with the offer, and post the SEC Filings detailing the reasoning behind the transaction; we became even more upset. Teekay LNG is 41% owned by its parent company Teekay Corp, which approved the transaction before minority shareholders voted. 9% of the remaining shareholders needed to approve the transaction, making it a formality. Our reason for owning TGP was relatively simple. We had a decent business with long-term contracts, generated an 8%-12% ROE, were in the process of deleveraging, and had an 8% dividend yield. We believed the business’s fair value was in the mid $ ’20s and got paid a dividend while we waited. There were several problems with the process of the sale including, 1. Management’s primary rationale in approving the transaction was “immediate liquidity on closing.” TGP is a publicly-traded stock that averaged over 1m shares traded per day, or $16m notional. Anyone (excluding the largest ETF’s/Mutual Funds) could get out of the stock in a few days without materially affecting the price. 2. The due diligence done by Investment Banks to source the right buyer appears to be poor. TGP started the process of selling themselves in January 2021 when the stock was ~$13. Only two strategic buyers were contacted, with the remaining 20 or so being financial buyers. The highest price TGP ever received was an $18 preliminary bid in early 2021 from Stonepeak. Since that initial offer, the company’s business outlook improved due to increased demand for natural gas, and the company continued to pay down debt. How the purchase price declined during that period baffles us. Our opinion is that TGP should have continued its path, reducing debt, paying off preferred equity, and selling non-strategic parts of the business. We were wrong in thinking TK Corp. would do what’s best for minority shareholders given their substantial stake. Our solution is to better understand potential conflicts of interest before purchasing securities.”
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Our calculations show that Teekay LNG Partners L.P. PFD UNIT SER A (NYSE: TGP-PA) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. TGP was in 10 hedge fund portfolios at the end of the third quarter of 2021, compared to 9 funds in the previous quarter. Teekay LNG Partners L.P. PFD UNIT SER A (NYSE: TGP-PA) delivered a -11.86% return in the past 3 months.
You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.