Nehal Chopra’s Ratan Capital Group has filed its 13-F with the SEC for the reporting period starting on Mar. 31. Chopra’s public equity portfolio has become increasingly concentrated in recent quarters, which makes her large move into four new stocks rather compelling.
Of course, it doesn’t hurt that Chopra ran one of the top performing funds in our database during the first quarter, trumping other hedge funds with net returns of 22.5% according to CNBC.
While Valeant Pharmaceuticals (VRX) and Actavis (ACT) remain her top picks and her exposure to the healthcare industry remains above 50%, she made four new purchases during the first quarter, which we’ll look at in this article, those purchases being in Kraft Foods Group (KRFT), Pinnacle Foods (PF), Zayo Group Holdings (ZAYO) and Calpine Corporation (CPN).
At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of 6 basis points, though these stocks underperformed the S&P 500 by an average of 7 basis points per month between 1999 and 2012.
On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 144% and beating the market by more than 84 percentage points.
We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise rather than large-cap stocks.
Still, let’s take a look at the four stocks that Chopra recently added:
Kraft Foods Group (KRFT)
With 1.01 million shares valued at $88.12 million, Kraft is the largest new holding in the portfolio of Ratan Capital Group. Kraft is also the most popular stock in the consumer non-durables industry, with 70 investment managers tracked by Insider Monkey having positions KRFT.
Earlier in March, Kraft entered into a definitive merger agreement with H.J. Heinz Company (HNZ), under which the newly-merged company will be called The Kraft Heinz Company. This combined company will bring together brands like Kraft, Heinz, Oscar Mayer, Philadelphia and Ore-Ida under one roof.
James Dinan‘s York Capital Management and Peter Adam Hochfelder’s Brahman Capital hold large positions in Kraft.
Pinnacle Foods (PF)
Pinnacle Foods comes in second place in terms of the top new stock picks of Chopra as she opened a position consisting of 1.78 million shares of the food manufacturer, valued at $72.56 million. PF stock has grown 20.06% year-to-date and is currently trading close to its 52-week high of $43.12. Bob Gamgort, CEO of Pinnacle Foods, said during PF’s April 30 earnings call that Pinnacle Foods is looking for innovative products in the baking category and is likely to offer some premium new products in the upcoming quarter.
The net earnings of Pinnacle Foods was up 2% for the quarter ending on Mar. 29 as compared to the year-ago earnings of $40.7 million. Levin Capital Strategies and JANA Partners are among the major shareholders of Pinnacle Foods.
Zayo Group Holdings (ZAYO)
Chopra also initiated a position in Zayo Group Holdings amounting to 1.80 million shares valued at $50.33 million. ZAYO has a market cap of $6.41 billion and its shares have declined 14.73% year-to-date.
Zayo Group Holdings is using Hibernia Networks for 100G augmentation through Hibernia Express for its transatlantic network. After the completion of this project, Zayo Group Holdings’ customers will be able to use a fast, secure and diverse transatlantic network, with this project increasing Zayo’s current network reach.
ZAYO announced quarterly revenue of $340.7 million in its first quarter of 2015, which was 21% higher on a year-over-year basis. SPO Advisory Corp and Glade Brook Capital Partners are among the primary investors of Zayo Group Holdings.
Calpine Corporation (CPN)
Calpine Corporation is the final new addition to the public equity portfolio of Ratan Capital Group, which owns 1.68 million shares of CPN, valued at $38.42 million as of Mar. 31. Calpine Corporation has a market cap of $7.55 billion and its shares trade at a current price-to-earnings ratio of 8.57.
CPN stock receives an average “buy” rating with a one-year price target of $25.38. Calpine Corporation reported operating revenues of $1.65 billion for the first quarter of 2015, which represented a drop of 16.2% from the first quarter of 2014.
At the same time, CPN was able to lower its losses to $10 million, a year-over-year reduction of 77.4%. Brahman Capital and Bill Miller‘s Legg Mason Capital Management hold positions in Calpine Corporation.
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