The 10 Stocks That Account for 90.88% of Varenne Capital’s 13F Portfolio

In this article we present the list of 10 Stocks That Account for 90.88% of Varenne Capital’s 13F Portfolio. Click to skip ahead and see The 5 Stocks That Account for 78.95% of Varenne Capital’s 13F Portfolio.

Guiseppe Perrone and Marco Sormani’s Varenne Capital Partners is a Paris, France-based investment firm that was co-founded by Perrone, Sormani, and David Mellul in 2003. The firm prides itself on conducting extensive in-house proprietary research and developing its own methodologies to fuel its investment decisions.

Perrone, the firm’s President and Managing Partner, earned degrees from Bocconi University in Milan and HEC in Paris. He served as a Senior Strategy and Finance Consultant at Corporate Value Associates before co-founding Varenne. Sormani followed a similar path, graduating summa cum laude from Bocconi University and HEC. He’s also an alumnus of NYU’s Stern School of Business. Sormani also spent time at Corporate Value Associates as a Senior Manager, in addition to serving as an auditor at KPMG.

Varenne Capital is coming off one of its most impressive years yet, as its flagship Value Active Fund returned 38.2% in 2021. That performance pushed the fund’s annualized returns since its October 1, 2007 inception to a solid 14.4%. Investors are certainly taking notice of the fund’s success, as its net inflows topped $1 billion last year, pushing assets under management to $4.3 billion at the end of 2021.

Heading into the second-half of 2022, the firm’s 13F portfolio contained just 12 long positions, five of which were added to it during the second quarter, replacing five former positions that were cast off, including a large position in Applied Materials, Inc. (NASDAQ:AMAT). The fund’s 13F exposure to tech stocks was cut in half as a result of that sale, with consumer discretionary and communications stocks accounting for 85% of its 13F assets. Alphabet Inc. (NASDAQ:GOOG), NIKE, Inc. (NYSE:NKE), and Dollar General Corporation (NYSE:DG) take up prominent positions in the highly concentrated portfolio of Varenne Capital Partners.

In this article we’ll take a look at Varenne’s ten largest positions, which account for nearly 91% of its 13F portfolio assets.

Photo by Firmbee.com on Unsplash

Our Methodology

The following data is gathered from Varenne Capital Partners’ latest 13F filing with the SEC. We follow hedge funds like Varenne Capital Partners because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.

All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q1 2022 reporting period.

The 10 Stocks That Account for 90.88% of Varenne Capital’s 13F Portfolio

10. Meritor Inc (NYSE:MTOR)

 

Value of Varenne Capital Partners‘ 13F Position: $3.26 million

 

Number of Hedge Fund Shareholders: 28

 

Alphabet Inc. (NASDAQ:GOOG), NIKE, Inc. (NYSE:NKE), and Dollar General Corporation (NYSE:DG) take up some of the most prominent positions in the 13F portfolio of Varenne Capital Partners. Taking up a smaller but still noteworthy 0.9% stake in its 13F portfolio is Meritor Inc (NYSE:MTOR). Varenne cranked up the size of its MTOR holding by 283% during Q2 to 89,637 shares. There was a 47% jump in hedge fund ownership of Meritor during the first quarter.

The increased hedge fund ownership of Meritor Inc (NYSE:MTOR) isn’t surprising, as the company is set to be acquired by Cummins in a $3.7 billion deal that was announced in February. The maker of vehicle and industrial components was an attractive acquisition target for Cummins, enhancing its diesel engine operations. Meritor is set to be replaced in the S&P SmallCap 600 by AdaptHealth Corp. (NASDAQ:AHCO).

Interestingly, Meritor Inc (NYSE:MTOR) also has an acquisition of its own in the works, as it’s paying 190 million euros to buy Siemens’ commercial vehicles business. The deal has been approved by Cummins as part of its own purchase of Meritor.

9. PNM Resources, Inc. (NYSE:PNM)

 

Value of Varenne Capital Partners‘ 13F Position: $4.60 million

 

Number of Hedge Fund Shareholders: 37

 

Varenne cut the size of its PNM Resources, Inc. (NYSE:PNM) stake by 37% during Q2 to 96,235 shares, which still gave its 13F portfolio 1.27% exposure to the stock. Hedge fund ownership of PNM has jumped by 37% over the past two quarters. Richard Gerson and Navroz D. Udwadia’s Falcon Edge Capital built a large stake in PNM Resources during Q1, buying 1.29 million shares to give its 13F portfolio 5.54% exposure to the company.

PNM Resources, Inc. (NYSE:PNM) is a holding company that provides electricity primarily to residents of New Mexico through its two subsidiaries. As with Meritor, the holding company is also set to be acquired, in this case by Avangrid, Inc. (NYSE:AGR). The completion of that deal is proving more challenging than Meritor’s, as it was recently rejected by the New Mexico Public Regulation Commission

Mizuho analyst Paul Fremont remains confident that the PMN Resources, Inc. (NYSE:PNM) deal will eventually go through and has a ‘Buy’ rating and $52 price target on the stock. Should the deal go through by May 2023 at the $50.30 contract price, Fremont notes that investors would achieve annualized returns of 18% on the deal.

8. Welbilt, Inc. (NYSE:WBT)

 

Value of Varenne Capital Partners‘ 13F Position: $4.77 million

 

Number of Hedge Fund Shareholders: 31

 

Varenne’s stake in Welbilt, Inc. (NYSE:WBT) was left unchanged during Q2, coming in at 200,407 shares, which accounted for a 1.32% stake in its 13F portfolio. Hedge fund ownership of WBT has declined for three straight quarters, sliding by 30% during that time. Carl Icahn’s Icahn Capital is the largest Welbilt shareholder among the funds in our database, owning 11.2 million shares.

Welbilt, Inc. (NYSE:WBT) shareholders resoundingly approved the company’s planned merger with Ali Group, a deal that has also come under some scrutiny from U.S lawmakers. To allay the Justice Department’s concerns regarding the merger, Welbilt is set to sell its Manitowoc Ice business to Pentair plc (NYSE:PNR) for $1.6 billion.

Turtle Creek Asset Management had this to say about Welbilt, Inc. (NYSE:WBT) in its Q1 2022 investor letter:

“The final example is Welbilt Inc. (NYSE:WBT), a company we had followed for years, but only added to our portfolio in mid-2020. As with many companies, its share price declined significantly in the March 2020 COVID Crash, falling by more than two-thirds. But whereas the share prices of many of the companies we owned quickly rebounded, Welbilt’s share price was still at a low point months later. By July of 2020, the stock was relatively attractive, so we added it to both TCEF and Turtle Creek United States Equity Fund at around $6.50 per share.5 During the last quarter of 2020, the share price rose into the low teens, during which time we trimmed the position by half…” (Click here to see the full text)

7. LHC Group, Inc. (NASDAQ:LHCG)

 

Value of Varenne Capital Partners‘ 13F Position: $5.29 million

 

Number of Hedge Fund Shareholders: 26

 

Varenne Capital built a new stake in LHC Group, Inc. (NASDAQ:LHCG) during Q2, buying 33,988 shares, which accounted for a 1.46% stake of its 13F portfolio. Several hedge funds have taken notice of LHC Group in recent quarters, as the company hit an all-time high in Q1 in terms of number of funds long its shares. John Orrico’s Water Island Capital and Ian Simms’ Impax Asset Management were some of the funds to open new LHCG stakes in Q1.

Healthcare services provider LHC Group, Inc. (NASDAQ:LHCG) is set to be acquired by UnitedHealth Group Incorporated (NYSE:UNH) in a deal valued at $170 per share. The deal is expected to close later this year. LHC Group had $576.2 million in revenue and $0.98 in adjusted EPS during Q2, both of which came in below estimates.

Here is what the Carillon Scout Small Cap Fund had to say about LHC Group, Inc. (NASDAQ:LHCG) in its Q1 2022 investor letter:

LHC Group (NASDAQ:LHCG) provides post-acute healthcare services including home health, hospice, home and community-based, and facility-based services as well as healthcare innovations. Favorable demographics and the cost benefits of at-home care have driven favorable long-term results. What’s more, late in the quarter, the company was approached with a buyout option from a large national healthcare company.”

6. Change Healthcare Inc. (NASDAQ:CHNG)

 

Value of Varenne Capital Partners‘ 13F Position: $7.04 million

 

Number of Hedge Fund Shareholders: 51

 

Closing out the first half of the list is Change Healthcare Inc. (NASDAQ:CHNG), in which Varenne trimmed its stake by 1% during Q2 to 305,083 shares, a position which accounted for 1.95% of the value of the fund’s 13F portfolio. David Abrams’ Abrams Capital Management owns the largest CHNG stake in our database, at just under 17 million shares, with the stock ranking as the fund’s third-largest position.

Change Healthcare Inc. (NASDAQ:CHNG) is another company that UnitedHealth Group Incorporated (NYSE:UNH) is attempting to buy, having first announced the proposed merger in January 2021. Antitrust concerns have held up the potential deal, and has headed all the way to a trial, which began on August 1 and is expected to last two weeks.

The American Hospital Association has come out against the merger, noting that it would reduce competition in the healthcare information technology space in addition to raising concerns about how patient care and claims should the largest insurer in the U.S acquire that much healthcare data and power. Analysts remain bullish on Change Healthcare Inc. (NASDAQ:CHNG) regardless of the trial’s outcome, with some believing the stock has limited downside from current levels and that it could even eclipse the United Health purchase price within a year on its own.

Check out the second half of this article to see where Alphabet Inc. (NASDAQ:GOOG), NIKE, Inc. (NYSE:NKE), and Dollar General Corporation (NYSE:DG) rank among Varenne’s top stock picks.

 

Click to continue reading and see The 5 Stocks That Account for 78.95% of Varenne Capital’s 13F Portfolio.

 

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Disclosure: None. The 10 Stocks That Account for 90.88% of Varenne Capital’s 13F Portfolio is originally published at Insider Monkey.