Robert Emil Zoellner is the President and Chief Portfolio Officer at Alpine Associates Advisors. Zoellner graded from Lehigh University in 1954 with a Bachelor’s degree in electrical engineering, then served two years in the Air Force before beginning his career on Wall Street. Zoellner founded Alpine over 30 years ago.
Alpine Associates, established in 1976, is a privately-owned hedge fund sponsor. The New Jersey based investment firm uses event-driven and long/short strategies to make its investments, with a focus on merger arbitrage. The firm manages over $1.9 billion for both institutions and high net worth individuals and families.
According to Alpine’s 2Q 13F filing, these were their five largest holdings at the end of June (see all of Alpine’s holdings here):
Alpine’s top stock pick was AmerisourceBergen Corp. (NYSE:ABC), as the fund owned almost 7 million shares – 8.2% of Alpine’s 13F portfolio – of the pharmaceutical services company as the end of the second quarter. This was flat from the end of March. AmerisourceBergen was successful in winning a big supply contract with pharmacy benefit manager Express Scripts. The new three-year agreement with Express calls for AmerisourceBergen to supply $18.5 billion in pharmaceuticals on an annual basis. Given the low margin of the contract, investors were relatively unimpressed, with AmerisourceBergen up only 6% year to date. The contract is expected to contribute about 23% of revenue and 3% of EPS. The company trades at a 15 trailing P/E and a 12.5 forward P/E.
Goodrich Corporation came in as Alpine’s second largest holding, worth 7.1% of the firm’s second quarter 13F holdings. Shortly after the close of the second quarter, United Technologies Corporation (NYSE:UTX) purchased Goodrich for $16.5 billion. Per the acquisition, United Technologies will have to sell some of its power generation and aircraft engine control businesses. United trades at a trailing P/E of 17 and a forward P/E of 13, suggesting that investors are encouraged by the Goodrich acquisition. United reported 2Q revenues down 5% from the prior year and EPS from continuing operations up 15% to $1.58, above estimates of $1.42. Due to the Goodrich acquisition delay, the company narrowed EPS guidance from $5.30-%5.50 to $5.25-$5.35.
The global manufacturer of electric components and tools, Cooper Industries PLC (NYSE:CBE) was Alpine’s third largest holding. True to their strategy, Alpine took a new position in Cooper during 2Q, the same quarter that Eaton Corp. announced an offer to acquire the company. The transaction is still pending approval. Cooper trades at a trailing P/E of 18 and a forward P/E of 15. Revenues are expected to rise 8% in 2012, but the company’s book-to-bill ratio of 1.02 for 2Q showed signs of slowing demand, with a June book-to-bill of 0.98. The company is up almost 40% on the Eaton acquisition news.
Alpine owned 2.7 million shares of Progress Energy at the end of 2Q. Shortly after the turn of the quarter, the long awaited merger with Duke Energy Corp. (NYSE:DUK) was completed. Alpine had increased their Progress stake 71% on hopes that the merger would finalize. Progress was up around 15% in the second quarter alone. We believe that Alpine, along with other top names, may now be betting on a Duke Energy-Progress Energy powerhouse. Duke Energy pays one of the top dividends amongst utilities, at a 4.7% yield.
Buying 3.5 million shares, Alpine took a new position in Ariba, Inc. (NASDAQ:ARBA), amounting to 4.7% of their 2Q 13F portfolio. Yet again, as with three other companies in Alpine’s top five, the company is currently finalizing an acquisition offer. In August, shareholders approved acquisition of Alpine by SAP AG, with the final step being regulatory approval. On the news, Ariba is trading at a trailing P/E of 877.
Of Alpine’s top five stocks, only AmerisourceBergen is not currently being acquired or merged. Not that it is not a possibility, as the company trades in-line with competitor Cardinal Health with a P/E of 15 and a P/S of 0.1, versus Cardinal’s 12 P/E and 0.1 P/S. Among the top funds owning the most shares of AmerisourceBergen, there was notable interest in 2Q. Glenview Capital took a new position totaling 3.5 million shares, while Viking Global and Ken Griffin increased their positions, 33% and 27%, respectively. See all funds owning AmerisourceBergen here.