Skylands Capital Trims Top Holdings Heading Into Q2

Based in Milwaukee, Skylands Capital was founded in 2004 by Charles Paquelet, who previously served as principal at Strong Capital Management since 1989. His approach to investment includes fundamental analysis, macro trends and on-site meetings with a company’s management. According to its latest 13F filing, Skylands Capital’s equity portfolio carried a market value of approximately $625 million at the end of the first quarter of 2016. Roughly 20% of the portfolio is represented by technology stocks, while transports and consumer discretionary sectors account for 18% each. It is important to note that Paquelet and his team have decided to reduce their exposure to a number of their biggest holdings and in this article we’ll have a look at the top five of them.

Imitating hedge funds and other institutional investors can help identify some of the most profitable stocks on the market. However, our extensive research that covered the period between 1999 and 2012, showed that the best approach is to follow these investors into their small-cap stocks. Our backtests showed that the 15 most popular small-cap stocks among hedge funds managed to generate a monthly alpha of 81 basis points, versus an alpha of 0.7 percentage points posted by their top 50 large-cap picks (see more details here).

Charles Paquelet and his team dumped 21% of their stake in American Tower Corp (NYSE:AMT) during the quarter, leaving Skylands Capital with 195,050 shares valued at $19.9 million. At the end of the 2015 fourth quarter, the largest stake in American Tower Corp (NYSE:AMT) among the world’s top hedge funds was held by Akre Capital Management, run by Charles Akre, which held 6.31 million shares worth roughly $611 million. American Tower Corp (NYSE:AMT) has a market cap in excess of $44 billion and pays an annual dividend of $1.90, which represents a yield of 1.80%. Shares are currently trading at a trailing Price to Earnings (P/E) ratio of 73.89, significantly higher than the industry average of 56. American Tower is set to release its next financial report on April 29, with analysts projecting earnings of $1.30 per share on $1.29 billion in revenues.

Skylands Capital’s stake in General Motors Company (NYSE:GM) has also been slightly reduced during the first quarter, with the fund currently holding 820,200 shares worth approximately $25.8 million. Among the funds in our database, Warren Buffett‘s Berkshire Hathaway continues to hold the largest position in the iconic car maker, which amounts to exactly 50 million shares worth $1.7 billion at the end of 2015. General Motors Company (NYSE:GM) stock is close to reaching the break-even point for the year, as the general market sell-off pushed to stock down by as much as 20% during the first quarter. For the last quarter, General Motors Company (NYSE:GM) posted earnings of $1.26 per share, easily beating the consensus estimate of $1.01, while its revenue grew by 4.5% on the year to $37.3 billion, also above the expectations of $35.75 billion.

As fears about Apple Inc. (NASDAQ:AAPL)‘s ability to keep on generating record sales on its flagship device – the iPhone – have resurfaced, Skylands Capital cut its holding of the stock by 5% to 349,365 shares valued at $38.1 million. In contrast to that, Ken Fisher‘s Fisher Asset Management inched up its position by 1% to 11.3 million shares worth more than $1.24 billion. Apple Inc. (NASDAQ:AAPL) stock tumbled on news of a significant decrease in iPhone shipments for the first quarter of 2016. Apple shipped approximately 42 million units, down by 43.8% from the 2015 fourth quarter and 23% lower compared to the first quarter of 2015, as reported by TrendForce. TrendForce said iPhone 6S sales were hurt by the device’s lack of exciting new features and that it expects the new iPhone SE to find it hard to attract customers in the Chinese market, which Apple Inc. (NASDAQ:AAPL) sees as critically important, due to stern competition in the budget smartphone segment.

Paquelet and his team have also chosen to reduce their exposure to Union Pacific Corporation (NYSE:UNP), a position held by Skylands Capital since the end of 2004. The fund now holds 661,375 shares, down by 11% over the quarter, worth roughly $52.6 million. Billionaire Ken Fisher also decided to reduce his fund’s stake in the railroad company, with Fisher Asset Management having indicated ownership of 131,453 shares in its latest 13F filing. Union Pacific Corporation (NYSE:UNP) has been recently downgraded by analysts at UBS to Neutral from the previous Buy rating, with a price target of $88 per share. Union Pacific Corporation (NYSE:UNP)’s profit for the first quarter slid by 15% on the year to $979 million, while its revenue dropped by 14% to $4.83 billion. Nevertheless, the company’s EPS of $1.16 managed to beat the estimates of $1.10, while the revenue was slightly lower than the consensus estimate of $4.90 billion.

According to its latest 13F filing, Skylands Capital’s stake in Crown Castle International Corp (NYSE:CCI) was reduced by 4% over the first quarter to 626,750 shares valued at $54.2 million. Andreas Halvorsen‘s Viking Global also holds a significant position in this stock, having reported ownership of 2.99 million shares as of the end of the 2015. Bill & Melinda Gates Foundation Trust, run by Michael Larson, held the largest stake in Crown Castle International Corp (NYSE:CCI) among the funds followed by Insider Monkey, which amounts to 5.33 million shares at the end of 2015. Crown Castle International Corp (NYSE:CCI) has recently announced the acquisition of Tower Development Corporation for $461 million in cash. Tower Development operates 336 towers in the United States and Puerto Rico, and its acquisition is expected to contribute roughly $25 to $27 million to site rental gross margin in the first full year of ownership.

Disclosure: none