Editor’s Note: Related tickers: Transocean LTD (NYSE:RIG), Priceline.com Inc (NASDAQ:PCLN), Cosan Limited (NYSE:CZZ), DISH Network Corp. (NASDAQ:DISH), Clearwire Corporation (NASDAQ:CLWR), Hertz Global Holdings, Inc. (NYSE:HTZ)
Highbridge Capital Management is a New York-based hedge fund with assets under management of approximately $29 billion. It is managed by key founder Glenn Russell Dubin, and Highbridge’s equity portfolio has a reported value of $6.4 billion. In the first quarter of 2013, several changes were made to its top holdings, including movements in mega-playerslike Transocean LTD (NYSE:RIG) and Priceline.com Inc (NASDAQ:PCLN).
The top five
Looking at Highbridge’s top five, Cosan Limited (NYSE:CZZ) takes the number one spot. The fund’s stake in this ethanol and sugar company fell by 16% last quarter, though the remaining 26.5 million shares were still worth a reported $517 million at the end of March. The stock’s price has not been in a clear trend in 2013, but has appreciated by 16% on the whole, with shares currently trading a little over the $20 mark. Cosan Limited (NYSE:CZZ) sports an expensive P/E of 24.87, significantly higher than the industry average of 15.80, though its forward P/E isa bit more reasonable near 15 times year-ahead earnings estimates.
A dividend yield of 1.4% is a nice bonus, but the true bullish thesis behind Cosan lies in its ability to capitalize on rising ethanol prices. Any investor betting on shrinking corn supplies this season would find solace in Cosan Limited (NYSE:CZZ), though this investment depends heavily on the outcome of the crop; we’ll be watching closely.
The second largest position disclosed in the Highbridge 13Fis in satellite TV service provider DISH Network Corp. (NASDAQ:DISH). The value of the fund’s investment now rests at$255.8 million, and while recent quarterly results didn’t hit what many investors wanted, DISH Network Corp. (NASDAQ:DISH) can still come back if it can successfully attain some of the acquisitions it seeks. The most speculated may be its ongoing talks with Clearwire Corporation (NASDAQ:CLWR), though its $2 billion bid for Lightsquared‘s spectrum might be what bulls want the most. No matter the outcome, we’ll be watching it closely.
Dubin has significantly reduced the fund’s ownership of Hertz Global Holdings, Inc. (NYSE:HTZ) shares. After selling 36% of the holding during the quarter, as of March 31, 2013, the fund holds approximately 9 million shares, with a reported value of a little over $200 million. Shares currently trade at approximately $25, surging 51% since the start of 2013. The stock has a beta of 2.78, a trailing P/E ratio of 37.16 and a forward P/E ratio of 10.24.
On Wall Street, four analysts recommend the stock as a Buy and another four consider it to be a Strong Buy, while only one expectsit to Underperform; analysts’ average price target on Hertz Global Holdings, Inc. (NYSE:HTZ) sees upside of another 10-11% from current levels. Although most investors assume synergies related to the Dollar Thrifty acquisition are driving this stock upwards, one underrated boon to Hertz’s business is related to Uncle Sam’s uncertainty. Macro-economically speaking, sequestration fears will continue to boost defensive stocks like Hertz Global Holdings, Inc. (NYSE:HTZ) until there’s more certainty in Washington.
The fund has increased its investment in online travel company Priceline.com Inc (NASDAQ:PCLN) by 55% (qoq), and it currently owns 230,993 shares worth a reported value of $159 million. Priceline shares have gained 27% in 2013, and a forward P/E of 17.65 indicates that there’s, amazingly, still some value here. Obviously, this low multiple is dependent on overly bullish bottom line estimates from the Street, but it’s worth noting that for the first quarter of 2013, the company reported earnings of $5.76 per share and revenues of $1.3 billion, beating consensus. This is a rare GARP (growth at a reasonable price) play in the travel space; ardent investors would be smart to snag it.
Dubin also made a massive 149% boost in its Transocean LTD (NYSE:RIG) stake. At the end of the first quarterof 2013, the fund disclosed that it held 2.9 millionshares of the energy giant, worth about $150 million. Now trading around the $95 mark, high multiples and a lack of an income-friendly history may concern some investors, but for those willing to dig a little bit deeper, it’s worth pointing out that Transocean LTD (NYSE:RIG) just approved its first-ever dividend outlay of $2.24 a share. Though shareholders did reject Carl Icahn’s $4 proposal, any improvement over a no-yield scenario is a net positive, and it’s likely that Mr. Market will agree moving forward.
Unlike many of its sector-focused peers, Highbridge Capital has a wide range of top equity investments, each supported by a clear, simple and easy-to-understand bullish thesis. While Cosan Limited (NYSE:CZZ) is a bet on higher ethanol and corn prices, DISH Network Corp. (NASDAQ:DISH) is a potential M&A play, Hertz Global Holdings, Inc. (NYSE:HTZ) is one of the most underrated defensive investments out there, and Priceline.com Inc (NASDAQ:PCLN) and Transocean LTD (NYSE:RIG) each have their own growth driver moving forward. Continue preparing for 13F-filing season here.