Atlantic Investment Management founder, Alex Roepers, shared his investment ideas with the 8th Annual Value Investing Congress today. The presentation concentrated on five companies, and the strategies for turning them around.
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Roepers, and his Atlantic Investment Management are unusual in the investment world. The firm is purely activist, taking positions in a small amount of companies and seeking to turn them around. Atlantic funds do not hold short positions, and no leverage. Using this strategy, Atlantic has netted 18.5% returns in the last twenty years.
Reoepers’ five investment ideas for the coming year are Energizer Holdings, Inc. (NYSE:ENR), Rockwood Holdings, Inc. (NYSE:ROC), Clariant AG, FLSmidth & Co. A/S (CPH:FLS), and Joy Global Inc. (NYSE:JOY).
The five companies chosen by Roeper at his presentation last year, have performed well since. The worst performing has seen its shares rise by around 5%, the second worst gained 22%, and the remaining three have all seen gains of more than 50%. The most successful of the companies, Flowserve Corporation (NYSE:FLS), gained a noteworthy 63%.
All of these firms have a market capitalization of over $1 billion, but under $10 billion, in line with Roepers’ investment philosophy. He likes to pick companies big enough to be important, but small enough to have an influence in.
The full presentation is below, but for those without the time to read it, here’s a summary of the investment thesis, prescribed by Roeper, for each of the firms listed.
Energizer Holdings, Inc. (NYSE:ENR): This is the second year that Roepers has recommended Energizer Holdings, Inc. (NYSE:ENR). The company did not perform as well as had been hoped last year, gaining just 5% since its first recommendation. Roeper sees the firm’s shares rising to $100 in the next year, on increasing shareholder confidence and better than expected performance in sales of its batteries and other household products.
Rockwood Holdings, Inc. (NYSE:ROC): Roepers sees Rockwood Holdings, Inc. (NYSE:ROC) shares hitting $70 in the coming year. Rockwood, a specialty chemicals company, plans to spin off part of its business, dealing with titanium dioxide. That variation in the price of that chemical is linked to the volatility in the firm’s share price. Once that has been removed, the company will have a more stable and predictable share price.
Growing demand for the company’s lithium products, on the back of increasing lithium battery consumption, will spur the company’s shares higher, according to Roepers. Rockwood acquired Talison, one of the world’s largest lithium suppliers recently.
Clariant AG: A Swiss chemical firm, with operations world wide, Clariant AG should hit CHF 17.50 in the next year according to Roepers. Key developments at the company include the removal of low margin parts of its business, such as textiles and cutting costs by closing several plants.
The company is moving into higher margin markets, and is currently in the process of deleveraging itself. The firm is highly invested in emerging markets and so should see higher growth rates.
FLSmidth & Co. A/S (CPH:FLS): A Denmark based mining support company, FLSmidth & Co. A/S (CPH:FLS) should hit DKK 467 in the next twelve months. That’s an upside of 33%. The company is involved in the supply of equipment and services to the mining sector.
Having been hit hard in recent times, now is an ideal time to get involved in the company, according to Roepers. Recent price pressures on the mining industry as a whole, have pushed the company’s price to an artificial low, and its strong place in emerging markets will give it an edge going forward.
Joy Global Inc. (NYSE:JOY): Another company in the mining sector, Joy Global Inc. (NYSE:JOY) should benefit from the same atmosphere that surrounds FLSmidth. The company also possesses stable cash flow from ongoing repairs and maintenance. Those repairs account for around 60% of the company’s business.
The company should benefit from coal power plants, currently under construction, in emerging markets like China and India. The overall world demand for coal will increase in the coming years, as will the capital intensiveness of mining operations in emerging markets. This leaves Joy Global Inc. (NYSE:JOY) in a prime position to succeed. Roepers expects the company to hit $105 in the next twelve months.
The full presentation from the Atlantic Investment Management founder is below: