Segantii Capital’s Top Investment Ideas Heading Into Q4

Simon Sadler‘s Hong Kong-based Segantii Capital saw the value of its public equity portfolio rise to $437.33 million at the end of September from $111.84 million at the end of the previous quarter. While the finance sector represented 24% of this portfolio, the technology sector amassed 23%. In this article we will evaluate the investment prospects of the fund’s top five picks, which include HSBC Holdings plc (ADR) (NYSE:HSBC), Tata Motors Limited (ADR) (NYSE:TTM), Houghton Mifflin Harcourt Co (NASDAQ:HMHC), United Continental Holdings Inc (NYSE:UAL), and J M Smucker Co (NYSE:SJM).

Hedge funds have been underperforming the market for a very long time. However, this was mainly because of the huge fees that hedge funds charge as well as the poor performance of their short books. Hedge funds’ long positions performed actually better than the market. Small-cap stocks, activist targets, and spin offs were among the bright spots in hedge funds’ portfolios. For instance, the 15 most popular small-cap stocks among hedge funds outperformed the market by more than 53 percentage points since the end of August 2012 (read more details here). This strategy also managed to beat the market by double digits annually in our back tests covering the 1999-2012 period.

#5 J M Smucker Co (NYSE:SJM)

Shares held (as of September 30): 371,300

Total Value (as of September 30): $12.13 million

Percent of Portfolio (as of September 30): 5.17%

Segantii initiated a position in the $13.79 billion food and beverage company during the third quarter. Over the past 12 months J M Smucker Co (NYSE:SJM)’s stock has appreciated by more than 14.3%, which compares extremely favorably with the consumer staples sector that has seen gains of only 1.72% during the same period. Just this month the company announced that it is going to sell its U.S. canned milk brands and operations to Eagle Family Foods Group LLC. Among over 700 elite hedge funds that we track, John W. Rogers‘ Ariel Investments is one of the largest stockholders of J M Smucker Co (NYSE:SJM) holding 1.93 million shares as of the end of September.

 

#4 United Continental Holdings Inc (NYSE:UAL)

Shares held (as of September 30): 400,000

Total Value (as of September 30): $20.98 million

Percent of Portfolio (as of September 30): 4.80%

Another newly initiated stake, the airline holding company has seen its stock price depreciate by more than 10% so far this year. The company has landed on rather tumultuous times lately, with the ouster of its former CEO Jeff Smisek in September and the new CEO Oscar Munoz being on medical leave since mid-October owing to a heart attack. Munoz is expected to return in the first quarter of 2016. While the company marginally missed the bottom line estimates in its financial results for the third quarter, revenues were in line with expectations. GMT Capital, which is led by Thomas E. Claugus, is the largest shareholder of United Continental Holdings Inc (NYSE:UAL) within our database and owned about 6.77 million shares at the end of the second quarter.