In new filings with the U.S. Securities and Exchange Commission, P2 Capital Partners, led by Claus Moller, reported cutting its position in UTi Worldwide Inc. (NASDAQ:UTIW), while Ricky Sandler’s Eminence Capital disclosed raising its stake in Keurig Green Mountain Inc (NASDAQ:GMCR). In another separate filing, Steve Cohen’s Point72 Asset Management revealed a new position in European commercial real estate company Northstar Realty Europe Corp (NYSE:NRE). We’ll discuss all of these moves in greater detail below.
Let’s first discuss P2 Capital’s move in UTi Worldwide Inc. (NASDAQ:UTIW), a $740.8-million supply chain services and solutions company. According to the filing, the fund reduced its position in UTi Worldwide to 23.17 million shares from around 24.0 million shares held previously. The current stake is equal to 19.3% of the company’s common stock. Denmark-based transport and logistics services supplier DSV agreed to acquire UTi Worldwide for $1.35 billion or $7.10 in cash per ordinary share in October. The acquisition is expected to be completed during the first quarter of 2016, subject to approval by shareholders and regulatory approvals. At the end of the third quarter, a total of 16 hedge funds in our database were holding UTi Worldwide, up from 14 hedge funds at the end of June. However, the aggregate amount of their investments fell heavily, to $178.2 million, versus $363.1 million at the end of the second quarter. Among those funds was Clint Carlson’s Carlson Capital, which owned 9.50 million shares as of the end of September.
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Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by more than 53 percentage points since the end of August 2012. These stocks returned a cumulative of 102% vs. a 48.7% gain for the S&P 500 Index (see more details here). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).
On the next page, we’ll be taking a closer look at Northstar Realty Europe Corp (NYSE:NRE) and Keurig Green Mountain Inc (NASDAQ:GMCR).
In Northstar Realty Europe Corp (NYSE:NRE), Point72 disclosed a 5.0% ownership stake, containing 3.17 million shares. The stake is passive by nature. Recently, NorthStar Realty Finance Corp. (NYSE:NRF) announced the completion of the spin-off of NorthStar Realty Europe Corp. (NRE), the company’s European real estate business. Northstar Realty Europe Corp (NYSE:NRE) started trading on the NYSE on November 2. Point72 Asset Management is a family office that manages the assets of its founder, Steven A. Cohen, and other eligible employees. Point72 is considered the descendant of SAC Capital Advisors, Cohen’s hedge fund that stopped managing money for outside investors in early 2014. Cohen’s long/short investment firm oversees a public equity portfolio worth $12.74 billion as of September 30.
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In a new filing, Eminence Capital disclosed increasing its passive stake in Keurig Green Mountain Inc (NASDAQ:GMCR) to 10.66 million shares from 3.72 million shares held by the fund at the end of the third quarter. The stake represents 7.2% of the company’s common stock. Keurig Green Mountain Inc (NASDAQ:GMCR) is a $7.6-billion personal beverage system company, which reported a drop in fourth-quarter profit for fiscal year 2015, to $94.6 million, versus $141.1 million in the same period of the 2014 fiscal year. Likewise, the company’s quarterly sales fell to $1.04 billion, versus $1.20 billion a year earlier. These results have understandably had a negative effect on the stock, which has dropped by 60.42% year-to-date.
A total of 16 hedge funds in our database were holding Keurig Green Mountain in their portfolios at the end of the third quarter, a significant decrease from 29 funds at the end of the second quarter. On the other hand, the aggregate value of hedge funds’ investments was $466.17 million at the end of September, down only slightly from $506.89 million at the end of the second quarter. Among the largest shareholders of Keurig Green Mountain are Legg Mason Capital Management, now a part of ClearBridge, and Joel Greenblatt’s Gotham Asset Management, holding 1.58 million shares and 603,320 shares, respectively.
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