Hedge Fund Emerging Sovereign Group’s Newest Stocks for 2013
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The beginning of February brought with it the latest 13F filing from J Kevin Kenny Jr., head of hedge fund Emerging Sovereign Group. Kevin Kenny started the fund over ten years ago, seeded by Julian Robertson of Tiger Management fame. He previously earned an MBA from Wharton and spent six years at investment bank Morgan Stanley. Two years ago, Carlyle Group engaged in a 55% purchase of the fund, which stands alongside Tiger’s share. We have examined his latest filing to determine his five largest new positions (compare them to his Q3 filing here); read on to see our analysis below.
Emerging’s largest new position was initiated in Mondelez International (NASDAQ: MDLZ), formerly known as Kraft Foods. Kraft changed its name to Mondelez in October of last year, then spun off Kraft Foods Group to its shareholders. The company makes some of the most recognizable brands in the world, including Oreos, Halls, and Trident. Their annual revenue is roughly $36 billion, but the last twelve months have seen MDLZ’s stock depreciate by 27%. Kenny is most likely hoping that analysts are right in seeing higher future valuations from here for the multinational. Billionaire Warren Buffett is wary of the company, dropping his position by almost 50% (see more about his $1.25 billion investment here).
Mead Johnson Nutrition Company (NYSE: MJN) is also a new position of Kenny’s, grasping 7.7% of his AUM. Mead Johnson is a pediatric nutrition company that manufactures well-known infant formula brand Enfamil. By creating products that are repeat buys for consumers, MJN hopes to serve children from the newborn stage up to five years old. MJN’s stock gave lackluster returns in 2012; an investor who bought a year prior would roughly have ended up flat. A pop in share price could occur as MJN gains market share due to increasing medical endorsements, which would carry Kenny’s position with it. Quant fund Two Sigma Advisors recently doubled their position in the stock.
Holding company Melco Crown Entertainment (NASDAQ: MPEL) is a purchase true to Kenny’s conventional investment strategy. The company develops and operates casino gaming and entertainment resort facilities in “The Vegas of Asia,” Macau. Gambling in the area has grown over 30% annually over the last five years, spurred on by China's burgeoning upper and middle classes. As a reflection of that popularity, MPEL’s stock grew by over 70% in the past twelve months, and sell-side analysts see more growth by issuing a higher price target a year from now. Billionaire Paul Singer of Elliott Management has seen his position to swell above $55 million (click here to see his best stock picks).
Ctrip.com International (NASDAQ: CTRP) was the fund's fourth largest new position and is once again at home in Kenny’s international portfolio. The travel company provides accommodations, hotels, and tours in China, also making use of the expendable income fairly new to the Chinese. CTRP is a favorite amongst ratings agencies like Barclays, Goldman, and Raymond James, who have all upgraded the firm since October of last year. The upgrades are largely supported by the continuous positive earnings surprises from Ctrip.com, including the most recent beat by $0.10 on Jan. 31. Bain Capital has stockpiled over $120 million in the stock.
Finally, online infrastructure service provider VeriSign (NASDAQ: VRSN) ends our list of Emerging Sovereign Groups new holdings, with approximately 4.7% of the fund’s assets devoted to the stock. VRSN roughly doubled the S&P 500’s performance of 12% in the trailing twelve months, spurred along by the completion of its five-year restructuring program that produced leaner, more efficient operations. VeriSign’s latest earnings announcement last month gave way to a six cent beat and outlined positive growth in both revenue and earnings versus the same quarter a year prior. Geoffrey Raynor of Q Investments maintains a $200 million debt investment in the company.
This article is written by Eric Winter and edited by Meena Krishnamsetty. They don't own shares in any of the stocks mentioned in this article. The Motley Fool recommends Ctrip.com International. The Motley Fool owns shares of Ctrip.com International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!