$3 Billion Hedge Fund?s New Stock Picks
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Doug Silverman is an expert in event-driven investing. In 2008, he established Senator Investment Group in New York with Alexander Klabin, an expert in private investments, value investing, distressed debt and special situations. Before founding Senator Investment, Silverman and Klabin worked at York Capital Management. Senator Investment Group has around $3 billion in assets under management.
Recently, Senator Investment released its latest holdings to SEC in a 13F filing. As of December 31, 2011, the company?s 13F portfolio has a total value of $3.4 billion, up from $1.8 billion for the end of September last year. The total number of positions was also increased from 35 at the end of the third quarter to 53 at the end of December.
Among the new positions in the quarter, it disclosed a new $116 million stake in Delphi Automotive Plc
DLPH posted strong fourth-quarter 2011 results. Its EPS was $0.88, heavily beating the analysts? consensus of $0.56 per share. Part of the extra earnings is driven by its low tax rate of 8.4%, which contributed an additional $0.17 EPS, but there was still about $0.15 unexpected EPS driven by the company?s operations. However, such strong performance seems to be a one-time event. Nearly half of the company?s 2011 launches were scheduled for this quarter. Moreover, the company achieved flawless operational execution and had super-high utilization rates, which are rare in the auto industry. Therefore, we think it does not make sense to model this forward. Despite that, DLPH still has strong upside potential. Analysts expect the company?s earnings to grow at over 40% annually, according to Zacks. However, we don?t think that is realistic and such high growth expectations have not been reflected in its price either. Though it was already up 48.56% since the beginning of this year, the stock is still cheap right now. DLPH?s current P/E ratio is only 9.17 and its forward P/E ratio is 7.67.
Another new position opened by Senator Investments over the fourth quarter was a $100 million stake in Valspar Corp
The company is faced with growing raw materials cost and some uncertainties in Europe and Asia. The management team of Valspar recently raised their expectations for the raw materials cost inflation from mid single digits to mid to high single digits. The management team is also concerned about their business in Europe and Asia. Volumes in China continued to be weak in the first fiscal quarter of 2012. Due to the raw material cost inflation and the current slow growth in Europe and Asia, we think investors should avoid the stock at this time. The stock has a 2012 forward PE ratio of 15 and is expected to grow its earnings by 10%. We don?t recommend Valspar but we think it is a better pick than Sherwin Williams
A few other large new positions opened by Senator Investments include BP Plc (NYSE: BP)
Source: http://feeds.fool.com/~r/usmf/foolwatch/~3/dklhy1yS5iM/.aspx
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