Glenn Russell Dubin‘s Highbridge Capital Management LLC is a privately owned hedge fund sponsor operating as a subsidiary of JPMorgan Chase & Co. The hedge fund co-founded by Dubin and Henry Swieca in 1992 has its headquarters in New York City and works worldwide out of a number of offices in different regions and countries. Recently, the managers of Highbridge Capital Management have been involved in discussions to buy back the alternative investment firm from JPMorgan Chase & Co. According to the fund’s latest 13F filing for the reporting period of March 31, this multi-strategy alternative investment management firm currently manages an equity portfolio worth $7.25 billion and has 1,350 active positions. Some of Highbridge Capital Management’s largest new holdings at the end of the first quarter are represented by the following American companies: Ralph Lauren Corporation (NYSE:RL), United Rentals Inc. (NYSE:URI) and Fiat Chrysler Automobiles N.V. (NYSE:FCAM), and we’ll discuss those purchases in this article.
Hedge funds and other big money managers like Dubin tend to have the largest amounts of their capital invested in large and mega-cap stocks like Gilead Sciences, Inc. (NASDAQ:GILD) (Dubin’s top long position) because these companies allow for much greater capital allocation. That’s why if we take a look at the most popular stocks among funds, we won’t find any mid- or small-cap stocks there. However, our backtests of hedge funds’ equity portfolios between 1999 and 2012 revealed that the 50 most popular stocks among hedge funds underperformed the market by seven basis points per month, showing that their most popular picks and the ones that received the bulk of their capital were not actually their BEST picks. On the other hand, their top small-cap picks performed considerably better, outperforming the market by 95 basis points per month. This was confirmed through backtesting and in forward tests of our small-cap strategy since August 2012. The strategy, which involves imitating the 15 most popular small-cap picks among hedge funds has provided gains of more than 139%, beating the broader market by over 80 percentage points through the end of April (see the details).
Highbridge Capital Management purchased a 426,310 share stake in Ralph Lauren Corporation (NYSE:RL) during the first quarter, with the holding valued at $56.06 million. The stock price of the newly acquired holding has dropped significantly since the beginning of the year and is currently bouncing up and down at around $131 per share. The American leader in the design, marketing and distribution of premium lifestyle products reported earnings per share (EPS) of $1.41, beating the Zacks Consensus Estimate of $1.32 EPS. The better-than-expected results for the last quarter might be the first sign of strong future financial performance. Nevertheless, Ralph Lauren’s net revenues for the last reporting quarter missed the Zacks Consensus Estimate, which investors appear to be more worried about than they are pleased over the improved earnings. Shares are down 29% year-to-date, and only time will tell whether the stock’s sharp decline this year signaled the perfect opportunity for investors like Dubin to enter the stock, or is the beginning of a longer downward trend. Along with Highbridge Capital Management, some other funds also increased their stakes in Ralph Lauren Corporation (NYSE:RL) during the first quarter, including the hedge fund led by Martin D. Sass.