Ross Turner, the youngest ever partner at Alex Snow’s Lansdowne Partners (one of Europe’s largest hedge fund firms), founded Pelham Capital in 2007 at the age of 29. Mr. Turner’s Pelham is a high-conviction equity long/short fund, with its top-ten positions usually accounting for most of the value of the fund’s equity portfolio. The promising hedge fund manager presented his bullish investment thesis on Irish business services group DCC at the world-renowned Sohn Investment Conference in 2013, which turned out to be a brilliant recommendation, as DCC has returned a whopping 145% over the past three years. Pelham Capital recently submitted its 13F filing for the first quarter of this year, disclosing ten equity positions aggregately valued at $270.76 million on March 31. With that in mind, the following article will discuss the London-based firm’s five highest-conviction investment ideas as of the end of the March quarter.
At Insider Monkey, we track around 785 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).
#5. Paypal Holdings Inc. (NASDAQ:PYPL)
– Number of shares held by Pelham Capital (as of March 31): 133,300
– Value of Pelham Capital’s holding (as of March 31): $5.15 Million
Pelham Capital upped its stake in Paypal Holdings Inc. (NASDAQ:PYPL) by 28,300 shares during the March quarter, which marks an increase of 26% quarter-over-quarter to 133,300 shares. The $5.15 million stake accounted for 1.90% of the fund’s equity portfolio on March 31. The payments processor has seen its shares gain 5% since the beginning of the year. At the end of March, Paypal received a Civil Investigative Demand from the Federal Trade Commission as part of an investigation to determine whether the global payments company has engaged in “deceptive or unfair practices” through its free digital wallet Venmo, in violation of the Federal Trade Commission Act. Venmo customers use the app to send peer-to-peer payments, and the service’s first quarter payments volume increased by 154% year-over-year to $3.2 billion. However, Venmo accounts for only a tiny portion of Paypal’s top-line figure, so the issues surrounding this app, which are unknown to the general public as of now, are not expected to have a material impact on the company’s financial performance. In the meantime, Paypal’s core payments business continues to grow steadily, with first quarter net revenue increasing to $2.54 billion from $2.14 billion a year earlier. Columbus Circle Investors, managed by Clifford G. Fox, increased its position in Paypal Holdings Inc. (NASDAQ:PYPL) by 28% during the first quarter, to 2.59 million shares.
The next two pages of this article will detail Pelham Capital’s top four equity investments as of March 31.