Boykin Curry, fund manager of the $23.64 billion Eagle Capital Management Fund, has slashed holdings in three big name stocks in the foruth-quarter, namely Valeant Pharmaceuticals Intl Inc (NYSE:VRX), Amazon.com, Inc.(NASDAQ:AMZN) and Alibaba Group Holding Ltd (NYSE:BABA).
Investors are keen to track Curry’s trades as the fund has been very successful in recent years- especially in comparison to the average hedge fund portfolio. Curry himself is ranked #39 out of 202 hedge fund managers tracked by financial accountability engine TipRanks. And if we look at the fund’s measure performance of 84.44% it beats both the average hedge fund portfolio (51.70%) and even marginally outperforms the S&P 500 (84.40%).
Curry is the son of the firm’s founders, Beth Curry and Ravanel Boykin Curry III who started the firm back in 1988. Beth Curry returned to school for an MBA after being married for 16 years, working as a securities analyst and equities trader before creating Eagle Capital. The fund’s strategy is based on investing in fairly valued businesses with limited market recognition of their long-term opportunity for growth.
According to Eagle Capital “Over a long holding period, these opportunities can be the point of greatest return and lowest risk. The team seeks to avoid high expectation stocks where the future opportunity has been discounted and the cost of disappointment high.”
Now let’s see how this strategy played out in Q4:
Valeant Pharmaceuticals Intl Inc
Curry almost halved the fund’s holding in controversial healthcare company Valeant Pharma. The remaining holding of 15,900 shares worth $231,000 have already dropped in value by 19.35% since the last filing date. Valeant has just announced a tender offer to purchase for cash up to $600 million of the company’s outstanding 6.75% senior notes due in 2018. Wells Fargo analyst David Maris says this refinancing is a “clear indication” that the $8 billion of asset sales the company was aiming for will not go ahead. Maris says the refinancing should be interpreted as a final effort to prevent Valeant from defaulting on its loans and restructuring. The “significant risks” ahead led Maris to reiterate his sell rating on the stock on March 6.
Shares in Valeant have crashed over the last 12 months from $69.55 to $11.71 due to multiple factors including mismanagement, huge debt, expensive acquisitions, and controversy. The stock’s analyst consensus rating on TipRanks is hold with 2 buy, 8 hold, and 3 sell ratings published in the last three months.
In Q4, Curry trimmed the fund’s holding in e-commerce giant Amazon by 5.82% to 1.5 million shares worth $1.16 billion. Since the last filing date, the shares have already gained 12.82%. Despite the cut back, Amazon is the fund’s seventh biggest holding as it makes up 4.92% of its total portfolio holdings.
Amazon Prime, the company’s premium subscription service, has just launched in Mexico. Subscription will cost 449 pesos ($23) for the first year and then 899 pesos ($46). Prime gives users access to Prime Video as well as single-day free shipping for deliveries to Mexico City, Guadalajara, Puebla and Queretaro. Deliveries to the rest of the country will take 2-days and for the US the delivery time is 6-9 days for goods ordered from Amazon USA. Amazon’s Prime Video will now compete with rival Netflix in Mexico- where Netflix has had a presence since 2011.
The market is very bullish on the outlook for Amazon which has a strong buy analyst consensus rating on TipRanks, and an average analyst price target that suggests an 11.31% upside potential. MKM Partners’ Rob Sanderson says Amazon’s position in comparison to competitors makes it “the best longterm growth story available to investors today.”
Alibaba Group Holding Ltd
The fund’s Alibaba holding also got the chop in Q4- this time by 22.52% to 16,180 shares worth $1.42 million. These shares have already gained 16.88% in value since the date of the last filing.
Like Amazon, the market outlook for Chinese e-commerce company Alibaba is very confident with analysts predicting a 19.65% increase in share prices over the next 12 months. In fact Alibaba and Amazon are competing for lead place in India’s growing and potentially very lucrative market- online sales are expected to reach $48 billion by 2020 according to a report by Forrester. Alibaba has now increased its holding by $177 million to a majority control in Paytm E-Commerce Pvt, the Indian e-commerce business of the payment company One97 Communications.
The analyst consensus rating for Alibaba is strong buy. Mark Mahaney, top RBC Capital analyst, reiterated his buy rating for the company last month on strong China retail sales growth and BABA’s new Cloud Computing division reaching a $1 billion revenue run rate.