Shah Capital is a hedge fund firm founded by its current President and Chief Investment Officer, Himanshu H. Shah, in 2005. The asset manager seeks unique investment opportunities by focusing on deep value, turn-around and special situation opportunities. Shah Capital engages in a so-called “soft activism”, as the investment firm has been involved in a series of corporate turnarounds, asset spin-offs, recapitalizations, and strategic investments.
Mr. Shah, who has more than 25 years of experience in the capital markets, established his own asset management firm after spending years as a senior portfolio manager at UBS. Himanshu H. Shah and his team believe that the underlying value of a business does not change as often as their stock prices do, a discrepancy that they try to capitalize on. The North Carolina-based asset manager recently filed its 13F for the June quarter, so this article will lay out the new additions to Shah Capital’s portfolio during the quarter, as well as discuss several of the firm’s longstanding top stock picks.
Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).
New Position: Aegean Marine Petroleum Network Inc. (NYSE:ANW)
– Shares Owned by Shah Capital (as of June 30): 241,961
– Value of Shah Capital’s Holding (as of June 30): $1.33 Million
During the second quarter of 2016, Shah Capital acquired a new stake of 241,961 shares of Aegean Marine Petroleum Network Inc. (NYSE:ANW). The new stake was worth $1.33 million on June 30 and made up 1.0% of the firm’s public equity portfolio. The international marine fuel logistics company has seen its market value plunge by 22% since the start of 2016. Aegean Marine posted record sales volumes of 4.21 million metric tons for the first quarter of 2016, despite low commodity prices. The company’s top line decreased by 25.8% year-over-year to $752.9 million, mainly due to depressed crude oil prices throughout the first quarter. Aegean Marine commenced bunkering operations in Algoa Bay, South Africa during the quarter, with the company currently serving 33 markets worldwide. The company’s bottom line decreased by 3.3% year-over-year to $11.8 million or $0.24 per share. Richard Mashaal’s RIMA Senvest Management owned 4.46 million shares of Aegean Marine Petroleum Network Inc. (NYSE:ANW) at the end of March.
New Position: JA Solar Holdings Co. Ltd. (ADR) (NASDAQ:JASO)
– Shares Owned by Shah Capital (as of June 30): 440,000
– Value of Shah Capital’s Holding (as of June 30): $3.01 Million
The North Carolina-based asset manager also added a 440,000-share position in JA Solar Holdings Co. Ltd. (ADR) (NASDAQ:JASO) to its portfolio during the three months ending June 30, which was valued at $3.01 million at the end of the period. The new position accounted for 2.3% of the hedge fund’s portfolio. The shares of JA Solar, one of the world’s largest manufacturers of solar power products, are down by 28% since the start of 2016. JA Solar was among SunEdison’s suppliers of solar cells and solar modules, and the now-bankrupt SunEdison, which was the largest renewable energy company in the world at one point, is said to owe JA Solar around $10.4 million. The producer of solar power products recorded net revenue of $538.1 million for the first quarter, up by 44.4% year-over-year and down by 24.5% sequentially. The shameful bankruptcy of SunEdison may put some weight on JA Solar’s top line in the upcoming quarters. Noam Gottesman’s GLG Partners was the owner of 83,280 American Depositary Shares of JA Solar Holdings Co. Ltd. (ADR) (NASDAQ:JASO) on March 31.
The next page of this article will reveal yet another new addition to Shah Capital’s portfolio during the first quarter, as well as reveal the fund’s two largest equity positions.
New Position: Credit Suisse Group AG (ADR) (NYSE:CS)
– Shares Owned by Shah Capital (as of June 30): 380,000
– Value of Shah Capital’s Holding (as of June 30): $4.07 Million
Shah Capital found Credit Suisse Group AG (ADR) (NYSE:CS) an attractive buying opportunity in the second quarter, as the hedge fund acquired a new stake of 380,000 Credit Suisse ADS’s during the period. The stake was worth $4.07 million at the end of the quarter and constituted 3.1% of the fund’s equity portfolio. The Swiss banking giant has lost 47% of its market value in 2016, as the bank’s turnaround efforts are being hampered by uncertainty around the United Kingdom’s imminent exit from the European Union. In late June, analysts at RBC Capital Markets downgraded Credit Suisse to ‘Sector Perform’ from ‘Outperform’, saying that “we expect a prolonged period of uncertainty post Brexit to negatively impact businesses and consumer confidence across the U.K. and Europe and beyond.” The second-biggest Swiss bank has been busy shifting away from investment banking to focus more on managing capital for high-net-worth individuals. Ken Fisher’s Fisher Asset Management owns 10.32 million ADS’s of Credit Suisse Group AG (ADR) (NYSE:CS) as of June 30.
Second-Largest Position: Coeur Mining Inc. (NYSE:CDE)
– Shares Owned by Shah Capital (as of June 30): 3.12 Million
– Value of Shah Capital’s Holding (as of June 30): $17.51 Million
The investment firm run by Himanshu H. Shah did not adjust its position in Coeur Mining Inc. (NYSE:CDE) during the June quarter, remaining with 3.12 million shares valued at $17.51 million on June 30. This was the second-largest holding in the hedge fund’s portfolio at the end of June, accounting for 13.4% of its value. The gold and silver producer, which has mines in the U.S, Mexico, and Bolivia, has seen the value of its stock skyrocket by 450% since the start of 2015. The real catalyst behind the impressive surge in the company’s share price has been the recovery in silver prices. Earlier this week, analysts at RBC Capital Markets upgraded Coeur Mining to ‘Outperform’ from ‘Sector Perform’ and raised their price target on the stock to $18 from $9, citing improving fundamentals and free cash flow potential. RBC considers the Chicago-based gold and silver producer as a “leveraged play on precious metal prices”. Jim Simons’ Renaissance Technologies had 2.52 million shares of Coeur Mining Inc. (NYSE:CDE) among its holdings at the end of March.
Largest Position: China Yuchai International Limited (NYSE:CYD)
– Shares Owned by Shah Capital (as of June 30): 3.34 Million
– Value of Shah Capital’s Holding (as of June 30): $32.91 Million
China Yuchai International Limited (NYSE:CYD) was the largest position in Shah Capital’s portfolio at the end of June, making up 25.1% of the firm’s portfolio. The “soft” activist firm left its 3.34 million-share stake in China Yuchai unchanged during the second quarter, with the stake being valued at $32.91 million on June 30. Shah Capital has previously urged China Yuchai International, a Singapore holding company for a Chinese manufacturer of diesel and natural gas engines, to increase its stake in the manufacturer. The Singapore holding company currently owns roughly 76% of its China-based subsidiary Guangxi Yuchai Machinery Company Limited. Shah Capital also urged China Yuchai to sell its stake in real estate company HL Global Enterprises, as well as its stake in consumer electronics distribution company Thakral Corporation. China Yuchai shares are up by 3% in 2016. Forward Management, run by J. Alan Reid Jr., was the owner of nearly 443,000 shares of China Yuchai International Limited (NYSE:CYD) at the end of the first quarter.