Atlantic Investment Management was established by Alexander J. Roepers in the late 80s, it manages over $1.7 billion, and is strictly a value oriented investment firm. Its main strategy involves buying large number of shares, as much as 7% of outstanding shares of mid cap stocks, it makes no use of leverage or leverage trading products and its main focus is on fundamental value. Alexander Roepers himself is of course a strong proponent of this investment methodology and he is justifiably proud of it since his fund has had an impressive performance over its 22 year history.
Alexander J. Roepers is known for having an efficient investment philosophy, and being a far-sighted, strategically thinking investor, having worked in various positions within the manufacturing sector he was quick to spot investment opportunity in well diversified, manufacturing sector companies that were neglected by investors. In 1993, he started AJR International, an offshore hedge fund which had a more active, shorter term trading style. One year later, he started a companion partnership, Quest Capital Partners, LP. In 1996, he launched a second fund, Cambrian Fund Ltd. and a companion partnership, Cambrian Partners LP, for investing in a concentrated portfolio of half a dozen medium to low-tech industrial companies. This strategy had already been tested, and was proven successful since the early 90s. AJR international achieved compounded annual returns of 22.2% since 1993!
Mr Roepers does all the hard and crucial work himself when it comes to portfolio management, contrary to popular beliefs about team work and team opinion, the most successful investment decisions are actually made by a single, experienced investment veteran. Here we can see Atlantic Investment management's recent portfolio activity and gain little insight into Mr Roepers' investment tactics. The best performing stock in his portfolio in the second quarter of 2011 has been Nalco Holding Company (NLC) with a 9.5% gain, followed by TRW Automotive Holdings (TRW), up 8.3%, and Energizer Holdings (ENR), up 7.1%. For the longer term however it is holdings such as Raytheon Co (RTN) which is believed to have an intrinsic value more than twice its current trading price, it comes as no surprise that Mr Roepers has increased this stock holding by 13%. During the first quarter Roepers sold his entire stake in Lubrizol (LZ), Polyone (POL), Schulman (SHLM), Solutia (SOA), and Xerox (XRX). Here is his portfolio activity and stock returns since the end of first quarter:
CompanyName | Ticker | Value | Activity | Return |
LUBRIZOL CORP | 0 | Sold Out | 0.7% | |
POLYONE CORP | 0 | Sold Out | 13.1% | |
SCHULMAN A INC | 0 | Sold Out | 0.6% | |
SOLUTIA INC | 0 | Sold Out | -11.1% | |
XEROX CORP | 0 | Sold Out | 0.6% | |
I T T CORP | 46539 | -73% | -1.6% | |
T R W AUTOMOTIVE | 8262 | -57% | 1.4% | |
LYONDELLBASELL | 9888 | -29% | 3.6% | |
STANLEY BLACK & DECKER | 13022 | -15% | -2.2% | |
ENERGIZER HOLDINGS | 116680 | -13% | 7.0% | |
CROWN HOLDINGS INC | 15432 | -11% | 1.1% | |
F M C CORP | 112362 | -1% | 4.6% | |
OWENS ILL INC | 184159 | 1% | -12.5% | |
RAYTHEON CO | 132262 | 13% | -2.8% | |
OSHKOSH CORP | 81374 | 15% | -8.9% | |
AVNET INC | 8523 | New | -5.5% | |
GENERAL CABLE | 6495 | New | -0.4% | |
GRACE W R & CO | 4480 | New | 22.8% | |
JARDEN CORP | 2325 | New | -5.3% | |
MATTEL INC | 9972 | New | 11.9% | |
NALCO HOLDING CO | 16113 | New | 7.0% | |
NEWELL RUBBERMAID INC | 12663 | New | -16.2% | |
TYCO ELECTRONICS LTD | 6964 | New | 8.9% |
The largest newly added holding is Nalco Holding Company, making just over 2% of Atlantic Investment management's portfolio. Steven Richman’s Eastside Capital and Bill Miller’s Legg Mason Capital Management are the two largest holders in NLC among the 300+ funds we are tracking (See Bill Miller’s top stock picks here).
The largest stock holding of Atlantis Investment Management is Owens Ill. Alex Roepers believes that this stock has a large margin of safety. "There are huge barriers to entry for glass packages. There is no worry of obsolescence for their products, and they have a very strong, growing presence in emerging markets," said Roepers about OI. Last October Roepers was expecting OI to reach $45 within a year. Roepers has the largest position in OI among hedge funds. Thomas Claugus’ GMT Capital is the second largest holder with $84 Million at the end of March (See Thomas Claugus’ favourite stock picks here).
The third largest stock currently held by Atlantic Investment Management is Raytheon Co. Roepers is the largest holder in RTN, followed by Ric Dillon’s Diamond Hill Capital and Steven Richman’s East Side Capital. It is interesting to see that Richman and Roepers have so many common stocks in their portfolios (See Steven Richman’s other top stock picks here).
During the second quarter Roepers underperformed the market because of OI’s poor performance. However, we like his style and stock picks, and expect his top stock picks to beat the market over the long term.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
