Moscow-born Alexander Knaster set up his British private equity firm Pamplona Capital in 2005. At the end of the first quarter, the two main sectors represented in the firm’s equity portfolio were the consumer discretionary and industrials sectors, with them contributing 35% and 37% respectively. The fund held about $57.34 million worth of U.S equities at the end of March and the portfolio was heavily concentrated, with positions in just four different companies (seven holdings in total, four of which are made up of one company’s various classes of stock). Pamplona Capital will be looking for better returns from its stock picks in the second quarter, as its five holdings in stocks with a $1 billion market cap delivered a weighted average returns loss of 4.6% in the first quarter. Towards that goal, the fund did add two new positions to its portfolio during the first quarter. With that in mind, let’s dig deeper into the firm’s favorite stocks, which it appears to be quite confident in given the lack of diversification in its portfolio.
Our research determined that following the small-cap stocks, that hedge funds are collectively bullish on, can help a smaller investor beat the S&P 500 by around 95 basis points per month (see more details here).
#4 Methanex Corporation (USA) (NASDAQ:MEOH)
– Shares Owned by Pamplona Capital (as of March 31): 218,600
– Value of Holding (as of March 31): $7.02 Million
Pamplona initiated a position in the $3 billion producer and supplier of methanol in the first quarter. Although up by about 1.58% so far this year, Methanex Corporation (USA) (NASDAQ:MEOH)’s stock has cratered by nearly 40% over the last year, while the commodity chemicals industry has posted average gains of 1% during the last 12 months. Both TD Securities and Citigroup downgraded the company last month, to ‘Hold’ and ‘Neutral’ respectively, from what were previously ‘Buy’ ratings. The analysts believe that the expected ramp in methanol prices in 2017 has already been factored into the company’s stock price, while on a more near-term basis, the market continues to look volatile and challenging for the first half of this year despite the recent stabilization of methanol prices. D E Shaw, founded by veteran investor David Shaw, held 504,000 shares of Methanex Corporation (USA) (NASDAQ:MEOH) at the end of the fourth quarter.
#3 Northstar Realty Europe Corp (NYSE:NRE)
– Shares Owned by Pamplona Capital (as of March 31): 726,200
– Value of Holding (as of March 31): $8.42 Million
Northstar Realty Europe Corp (NYSE:NRE) was Pamplona’s other newly initiated holding during the first quarter. The company’s stock is up by 2% so far this year and currently has a dividend yield of about 5%. The $747 million real estate investment trust (REIT), which invests in commercial properties, announced in January that it had hired Goldman Sachs to seek strategic options. This was followed by an activist campaign by Land and Buildings, a hedge fund run by former Citigroup analyst Jonathan Litt, which nominated six directors to the company’s board. Another money manager bullish on the company is Steve Cohen, whose Point72 Asset Management held about 3.30 million shares of Northstar Realty Europe Corp (NYSE:NRE) at the end of December.
We delve into Pamplona Capital’s two favorite companies on the next page.