Orange Capital’s Top Picks Ahead of Its Closure

#3 American Capital Ltd. (NASDAQ:ACAS)

– Shares owned by Orange Capital (as of December 31): 4.77 million

–Value of Holding (as of December 31): $65.88 million

American Capital Ltd. (NASDAQ:ACAS) is the only stock in this list in which Orange Capital reduced its stake by 32% during the fourth quarter. Since American Capital Ltd. (NASDAQ:ACAS)’s stock witnessed a spectacular rally, rising by 28.7%, during the fourth quarter it looks like the fund reduced its stake to book some profits rather than due to a change in its conviction on the stock. Even though the asset management and private equity firm missed the earnings expectations for its latest quarter recently, its shares have had a strong rally in the past few days and currently trade up 1.23% year-to-date. While the Street had projected the company to report EPS of $0.31 on revenue of $169.3 million, American Capital Ltd. declared EPS of $0.24 on revenue of $173 million for the quarter. Along with its earnings release, the company added that it bought back 20.7 million of its shares during the fourth quarter for $298 million. Overall, the company has bought back 13.8% of its outstanding shares in the fiscal year 2015, thereby, increasing the book value of its remaining shares by $0.75 apiece. Billionaire Paul Singer‘s Elliott Management initiated a stake in the company during the fourth quarter by purchasing 12.26 million shares.

#2 Nexstar Broadcasting Group, Inc. (NASDAQ:NXST)

– Shares owned by Orange Capital (as of December 31): 1.2 million

–Value of Holding (as of December 31): $70.31 million

Amid a 24% increase registered by Nexstar Broadcasting Group, Inc. (NASDAQ:NXST)’s stock during the fourth quarter, Orange Capital raised its exposure to the company by 14%. However, considering the over 20% decline that Nexstar Broadcasting Group, Inc. (NASDAQ:NXST)’s stock has had this year, retrospectively it doesn’t look like the fund made a wise decision by increasing its stake in the company. The company recently reported its fiscal 2015 fourth quarter numbers, declaring EPS of $0.86 on revenue of $276.77 million. For the same quarter of the previous financial year, the company reported EPS of $0.96 on revenue of $192.80 million. On January 27, the company announced that it had entered into a definitive agreement to acquire Media General Inc (NYSE:MEG) in a $4.6 billion accretive cash-and-stock deal. Not taking into account this deal, Nexstar Broadcasting Group’s stock currently trades at a free cash flow yield of nearly 20% and forward P/E of 12.80, which analysts believe is a really low valuation for a company that generates a significant amount of free cash and is growing rapidly. Quincy Lee‘s Ancient Art, which was among the best performing hedge funds in 2015 covered by Insider Monkey, reduced its stake in the company by 17% to 352,305 shares during the October-December period.

#1 AMAYA INC (NASDAQ:AYA)

– Shares owned by Orange Capital (as of December 31): 5.99 million

–Value of Holding (as of December 31): $75.44 million

Though its shares decline by 30.8% during the fourth quarter, Orange Capital increasing its holding in the company by 40% helped AMAYA INC (NASDAQ:AYA) to emerge as the fund’s top stock pick going into 2016. Amid a broad based sell-off in the equity markets this year, shares of the Quebec-based gaming company have managed to buck the trend led by the back-to-back good news and currently trade up nearly 15% year-to-date. On February 1, the company’s Chairman and CEO, David Baazov, announced that he intends to take the company private by making an all-cash proposal of acquiring all of the company’s outstanding shares at C$21 (US $15.63) per share. A day after that, the State of New York passed an online poker bill out of a committee hearing. Since this was the first time that such a bill has been passed since the topic of Internet gaming regulation was introduced in 2013, investors feel that Amaya with its leading brands ‘PokerStars’ and ‘Full Tilt Poker’ will be a major beneficiary of the legalization of online poker going forward.

Disclosure: None