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New York-based hedge fund Glenhill Advisors LLC, founded in 2001 by Glenn J. Krevlin, is a global multi-sector equities investment firm. The firm employs a long-short strategy in making its investments, and it typically invests in small-cap equities in public equity markets around the globe with a majority of its investments in consumer goods and services companies. The firm manages the Glenhill Capital LP, Glenhill Overseas Partners Ltd., Glenhill Special Opportunities Master Fund LLC hedge funds. Of this, its flagship Glenhill Capital LP, with over $500 million in assets, has generated a 12.1% annual return since inception, and it generated a 18.65% return in 2010.
The fund holds a moderately concentrated portfolio of 46 positions, with half of its holdings in small-caps and micro-caps, another 30% in mid-caps, and the remaining 20% in large-cap equities. Its portfolio turnover is around 60%, implying an average holding period of almost two years. Based on the most recent SEC 13-F filing for the March 2011 quarter, we determined that the portfolio is over-weight services (51%), consumer cyclical (17%) and utility (6%) sectors, it is equal-weight in the basic materials (5%) sector, and it is under-weight all other sectors.
The following summarizes its largest new buys and sells in the latest reported 13-F filing for the March 2011 quarter, and updated based on any 13-G filings since the end of the quarter:
  • Service sector: Buy Target Corp. (NYSE:TGT). Glenhill added $110 million to its $270 million position in the prior quarter, including opening new positions in discount retailer Target Corp., men’s apparel retailer The Men’s Wearhouse Inc. (NYSE:MW) and discount variety store chain Dollar Tree Inc. (NASDAQ:DLTR). TGT is the biggest new buy in the portfolio at $46 million. Furthermore, the stock trades at a forward 11 price-to-earnings (P/E) ratio, well below its historical trading range while earnings are projected to continue rising in the high single digits. Furthermore, the stock is well below its $61 recent high; analyst targets for the stock are in the $60s, making this an attractive buy at these levels. MW, in comparison, is trading at a premium 15 forward P/E near the high end of its historic P/E trading range, and the stock is trading at recent highs based on the strong April quarter report in which the company strongly beat analyst estimates and guided higher.
  • Technology sector: Glenhill cut $50 million from its $85 million position, including $38 million in Qualcomm Inc. (NASDAQ:QCOM), a designer of CDMA-based ICs and system software for wireless voice and data communications, multimedia functions and GPS products. The position in QCOM was opened in the high-$30s at the end of 2006, so the selling out of this position was probably profit-taking. QCOM continues to trade at a very attractive 15 forward P/E based on fiscal year September 2012 earnings, which is near the low-end of its historic P/E trading range. Glenhill also completely sold out of its $20 million position in Equinix Inc. (NASDAQ:EQIX), a provider of network-neutral collocation, interconnection and managed services. The EQIX position was opened in the $100 range at the end of 2009, so Glenhill selling it in the $90s last quarter indicates their bearishness on this position. EQIX is trading at a high 50 forward P/E; however, earnings are projected to explode 150% in 2011 and 50% in 2012.
  • Consumer cyclical sector: Buy Jarden Corp. (NYSE:JAH). Glenhill added $45 million to its $85 million position in the prior quarter, including adding $19 million to their $13 million position in Dana Holding Corp. (NYSE:DAN), a manufacturer of modules, axles, chassis, suspension and drive-shafts for automotive OEMs. The position in DAN was opened in the mid-teens at the end of 2010, and seems to be building towards a large position. The stock seems to be trading at a fair valuation based on current numbers. Glenhill also has its largest position in Jarden Corp. (JAH), a manufacturer of plastic cutlery, home canning, playing cards, matches, ropes and other consumer and outdoor products. The position in JAH was opened in the low teens in early 2009, so Glenhill adding another $7 million on top of its large $43 million position has high conviction. The company recently beat its quarterly revenue and earnings estimates; however, the stock is down since then and is trading at a forward P/E of less than 10, near the bottom of its historic trading range. Furthermore, analyst price targets for the stock are in the mid-$40s, making this an attractive buy at these levels.
  • Capital goods sector: Sell Sensata Technologies Holdings (NYSE:ST). Glenhill cut $38 million of a $49 million position in ST, a manufacturer of customized sensors and controls for current and heat protection in aircraft, cars and electric motors. The position was opened in the high teens in mid-2010, so Glenhill selling most of it as the stock ascended into the mid-$30s last quarter is profit-taking. ST trades at a very high premium, 17 forward P/E, while revenue and earnings are projected to grow at high single digits and in the 15-20% range going forward. Furthermore, analyst targets for the stock are in the high-$30s and the stock is up approximately 100% from mid-2010 IPO levels while earnings are up only in the high teen percentages versus last year, making this a conviction sell at these levels.
Table
Company
Ticker
Action
Market Value at end of March 2011 Quarter
Change in Value from Prior Quarter
Percent of Portfolio
Percent Shares Owned
Top Buys and Sells
Target Corp.
TGT
New
$ 46 million
$46 million
6.00%
0.13%
Qualcomm Inc.
QCOM
Drop
$ 0 million
($38) million
0.00%
0.00%
Sensata Technologies
ST
Cut
$ 12 million
($38) million
1.50%
0.19%
Lowes Co.
Drop
$ 0 million
($32) million
0.00%
0.00%
Mens Wearhouse Inc.
MW
New
$ 27 million
$27 million
3.57%
1.96%
Dollar Tree Inc.
DLTR
New
$ 22 million
$22 million
2.90%
0.33%
Equinix Inc.
EQIX
Drop
$ 0 million
($20) million
0.00%
0.00%
Dana Holding Corp.
DAN
Add
$ 32 million
$19 million
4.12%
1.24%
Pep Boys Manny Moe & Jack
Add
$ 48 million
$15 million
6.29%
7.20%
Teleflex Inc.
Drop
$ 0 million
($10) million
0.00%
0.00%
Top Holdings
Jarden Corp.
JAH
Add
$ 50 million
$7 million
6.52%
1.53%
Covanta Holding Corp.
CVA
Add
$ 49 million
$4 million
6.35%
1.94%
Starwood Property Trust
Same
$ 45 million
$0 million
5.93%
2.19%
Cigna Corp.
Cut
$ 44 million
($6) million
5.78%
0.37%
Collective Brands Inc.
Cut
$ 42 million
($9) million
5.51%
3.18%
TD Ameritrade Holding
Same
$ 42 million
$0 million
5.50%
0.35%
Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Source: Top Move Made by Glenn Krevlin of Glenhill Advisors LLC