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Tracking Alex Roepers' Atlantic Investment Management Portfolio - Q2 2019 Update

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Includes: ADT, AEXAY, AVT, AXE, AYI, CAG, CBT, CR, CTTAY, DBD, DXC, EMN, GFSZY, HUN, IGT, KFY, KMT, LEA, MOS, MWA, NAV, OI, OSK, PRYMY, SVYSF, TIF, TKR, TSLA, WRK
by: John Vincent
Summary

Atlantic Investment Management’s 13F portfolio value decreased from $391M to $371M. The number of positions remained steady at 18.

Alex Roepers increased Owens Illinois while decreasing Avent Inc. and Huntsman Corp.

The top three positions are Owens Illinois, Eastman Chemical, and Timken, and they add up to ~52% of the portfolio.

This article is part of a series that provides an ongoing analysis of the changes made to Alex Roepers’ 13F portfolio on a quarterly basis. It is based on Roepers’ regulatory 13F Form filed on 8/14/2019. Please visit our Tracking Alex Roepers’ Atlantic Investment Management Portfolio article for an idea on his investment philosophy and our last update for the fund’s moves during Q1 2019.

This quarter, Roepers’ 13F portfolio value decreased ~5% from $391M to $371M. The number of holdings remained steady at 18. The top three holdings are at ~52% while the top five are at ~74% of the 13F assets: Owens Illinois, Eastman Chemical, Timken Co, Avent Inc., and DXC Technology.

Atlantic Investment Management’s annualized returns since the flagship fund’s inception in 1992 through 2017 was impressive at ~16%. Last two years, the fund has underperformed the S&P 500 Index. To know more about activist investing, check out Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations.

Note: In a June interview with Bloomberg Markets, Roepers disclosed that his firm is short Tesla (TSLA). Also, they are long a number of mid-sized businesses in Europe: Atos SE (OTCPK:AEXAY) of France, G4S (OTCPK:GFSZY) of the UK, Continental AG (OTCPK:CTTAY) of Germany, Prysmian Group (OTCPK:PRYMY) of Italy, and Solvay SA (OTCQX:SVYSF) of Belgium.

Stake Disposals:

Diebold Nixdorf Inc. (DBD): DBD stake was established in Q3 2016. The following quarter saw the position built to a large stake at prices between $21 and $26. Recent activity follow: Q4 2018 saw a ~50% reduction at ~$4 per share and that was followed with a ~85% selling last quarter at prices between $2.50 and $12. The very small 1.41% portfolio stake that remained was disposed this quarter. Their cost-basis was ~$20 per share. Roepers realized losses. The stock is now at ~$11.60.

ADT Inc. (ADT), Crane Co. (CR), International Game Technology (IGT), and Navistar International (NAV): These very small positions were disposed during the quarter.

New Stakes:

Kennametal Inc. (KMT), Mueller Water Products (MWA), Korn Ferry (KFY), Mosaic Co. (MOS), and Tiffany & Co. (TIF): These are very small (less than ~0.60% of the portfolio each) positions established during the quarter.

Stake Decreases:

Avnet Inc. (AVT): The AVT position saw a ~600% stake increase in Q2 2018 at prices between $38 and $43.50. That was followed with a stake doubling next quarter at prices between $43 and $49. Q4 2018 saw an about turn: ~30% selling at prices between $34 and $45. The stock currently trades at ~$40.80 and it is a top-five position at ~11% of the portfolio. Last two quarters have seen a ~24% selling at prices between $35.50 and $48.50.

DXC Technology (DXC): DXC is a large (top five) ~11% of the portfolio stake established in Q4 2018 at prices between $50 and $94 and the stock currently trades well below that range at ~$33.25. For investors attempting to follow, DXC is a good option to consider for further research. Last quarter saw a ~7% selling and that was followed with marginal trimming this quarter.

Oshkosh Corp. (OSK): OSK was a minutely small ~0.65% portfolio stake as of Q3 2018. Next quarter saw the position built to a large ~8% stake at prices between $53 and $73. The stock currently trades at ~$67. This quarter saw a ~5% trimming.

Huntsman Corp. (HUN): HUN is a large ~10% of the portfolio stake established in Q2 2017 at prices between $23 and $27. There was a ~20% selling the following quarter at prices between $25 and $29. Last four quarters had seen a combined ~27% selling at prices between $18.25 and $35.30. That was followed with a similar reduction this quarter at prices between $17.35 and $25. The stock currently trades at ~$18.90.

Acuity Brands (AYI), Cabot Corp. (CBT), Conagra Brands (CAG), and WestRock Co. (WRK): These very small (less than ~0.60% of the portfolio each) stakes were reduced during the quarter.

Stake Increases:

Owens Illinois (OI): OI is Roepers’ largest position at ~24% of the 13F portfolio. It is a very long-term stake. In 2008, the position was minutely small and was built to 11.2M shares by 2012 through consistent buying. It was sold down by ~40% the following year but was rebuilt to 12.2M shares in 2014 at prices between $24 and $35. Recent activity follow: Q4 2018 saw a ~23% selling at prices between $15.75 and $19.25 and that was followed with a ~41% selling last quarter at prices between $17 and $20.50. There was a ~20% stake increase this quarter at prices between $16 and $20. The stock is currently at ~$10.

Note: In June, Roepers said their fair value estimate of Owens Illinois is double the current stock price. The stock was at ~$16.50 at the time. He also reiterated that the company should sell the European business to de-lever, a call he first made in October last year.

Eastman Chemical (EMN): EMN is a top-three 16.11% of the 13F portfolio stake established in Q4 2015 at prices between $65 and $74. The position has wavered. Recent activity follow: There was a ~40% selling in Q2 2018 at prices between $102 and $109. That was followed with a ~80% selling in Q4 2018 at prices between $68 and $97. The position was rebuilt last quarter at prices between $71 and $85. The stock is now well below that range at ~$62. This quarter saw a ~3% further increase. For investors attempting to follow, EMN is a good option to consider for further research.

Timken Co. (TKR): TKR was a very small position established in Q3 2018 at prices between $43 and $52. The stake was built to a very large stake last quarter at prices between $36.50 and $45. The stock is now at ~$38.70. This quarter also saw a ~10% stake increase. It is now a top-three position at 12.66% of the portfolio.

Anixter International (AXE) and Lear Corp. (LEA): These are very small (less than ~0.50% of the portfolio each) positions that were increased during the quarter.

Kept Steady:

None.

The spreadsheet below highlights changes to Roepers’ 13F stock holdings in Q2 2019:

Alex Roepers - Atlantic Investment Management Q2 2019 13F Report Q/Q Comparison

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.