Shah Capital’s Top Global Picks For First Quarter

Himanshu H. Shah‘s Shah Capital Management recently filed a 13F form with the Securities and Exchange Commission. Let us have a look at how well the fund’s top holdings are poised for the second quarter.

China Yuchai International Limited

Founded in 2005, Shah Capital is a global investor seeking out companies that pose as the best candidates for growth as compared to both their local and global competitors. Its founder, Himanshu H. Shah, worked for the Swiss financial services company UBS, for 10 years before launching his own venture. The fund is of a rather modest size with assets under management amounting to $194 million. The market value of Shah Capital’s equity portfolio stood at $114.61 million at the end of the first quarter. The fund’s top picks were: China Yuchai International Limited (NYSE:CYD), UTStarcom Holdings Corp (NASDAQ:UTSI), Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) and VimpelCom Ltd (ADR) (NASDAQ:VIP).

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Shah Capital initiated a stake in China Yuchai International Limited (NYSE:CYD) in the first quarter of 2012 with some 2.27 million shares. Currently the stake stands at 2.51 million shares valued at $49.62 million and represents 43.30% of the fund’s equity portfolio. The manufacturer of diesel engines has been up by about 25% since it was added to Shah’s equity portfolio. Back in June 2013, Shah sent a letter to China Yuchai International Limited (NYSE:CYD)’s board of directors, urging them to unlock the true value of the company by taking steps such as increasing its stake in the subsidiary, Guangxi Yuchai to 100% from the 76.4% stake back then. A complete sale of holdings in real estate company HL Global Enterprises, as well as consumer electronics distribution company Thakral Corp was also advised. China Yuchai International Limited (NYSE: CYD) has recently announced its agreement with the Hong Kong based Shentou Investments for a joint venture YC Europe, which essentially involves selling Guangxi Yuchai’s off-road engines in Europe. Among other funds betting on China Yuchai’s prosperity is Jean-Marie Eveillard‘s First Eagle Investment Management.

UTStarcom Holdings Corp (NASDAQ:UTSI)‘s holding of 10.70 million shares valued at $28.36 million represents about 24.75% of Shah Capital’s portfolio value. The provider of packet optical transport and broadband access solutions to the telecommunications carriers is down about 9.9% year to date. The company’s past is marred by disappointments quarter after quarter. However, a new management team in 2012 headed by CEO William Wong and also the appointment of Himanshu Shah as director in November 2013 has been taking several initiatives, including divestment in Next Generation Network equipment business, to transform the company. Another investor in UTStarcom Holdings Corp (NASDAQ:UTSI) is Chuck Royce’s Royce & Associates, which held about 1.52 million shares valued at $4.29 million at the end of the fourth quarter.

The corruption scandal seems to be losing its hold on Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR), which represents Shah Capital’s fifth largest holding, as the stock has appreciated by more than 50% in the last three weeks. The Brazilian company’s recently released financial statements, the first in the last eight months, are seen as a sign that the company is finally getting out of the murky waters that it swam in for a while. Shah Capital increased its stake in Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) by a significant 46% during the first quarter to 913,110 shares valued at $5.49 million. Howard Marks‘ Oaktree Capital Management held about 6.55 million shares valued at $47.81 million at the end of the fourth quarter.

VimpelCom Ltd (ADR) (NASDAQ:VIP) is another one of Shah Capital’s holding that has performed well this year, and is up by nearly 37.7% year to date. With a bulk of its operations being in Russia, Vimpelcom’s stock was fueled by positive news about the country’s economic recovery in the last several months. Shah Capital’s stake in VimpelCom Ltd (ADR) (NASDAQ:VIP) amounted to 1.30 million shares valued at $6.79 million. In addition, John Resnick’s Jericho Capital Asset Management held 6.7 million shares valued at $28.14 million at the end of last year.

Disclosure: None