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10 Stock Picks of Nathaniel August’s Mangrove Partners

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·7 min read
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In this article, we will discuss 10 stock picks of Nathaniel August’s Mangrove Partners. If you want to skip our detailed analysis of these stocks, you can go directly to the 5 Stock Picks of Nathaniel August’s Mangrove Partners.

Nathaniel August founded Mangrove Partners in April 2010 and now serves as the President of the New York-based hedge fund. After completing his bachelor’s degree from the esteemed Brown University, Mr. August started as an analyst at Goldman Sachs and worked there for nearly two years between July 2001 and May 2003.

After that, he switched over to K Capital Partners as an analyst from June 2003 to January 2006. Brahman Capital was his next destination, where he worked as a Senior Analyst from March 2006 to September 2008. Following that, his last job before founding Mangrove Partners was serving as a Director at White Eagle Partners between December 2008 and January 2010.

Investment Strategy

Mangrove Partners believes that the daily increase or decrease in stock prices and valuations do not represent a true picture of the market due to the emotions of the market participants. Furthermore, the market ignores and undervalues businesses that are small in size, illiquid in nature, and not covered extensively by brokerage firms.

Mangrove Partners drives on an opportunistic and value-oriented strategy. The hedge fund emphasizes pre-identified circumstances where there is a higher probability of finding an opportunity to invest. The hedge fund seeks to reap benefits from developments related to forced selling and company-specific news with a focus on legal complexity or smaller issues. The hedge fund also looks for investments where uncertainty or complexity of an event is in play; there is a likelihood of bankruptcy, or the growth of an organization has reached its peak or is in decline.

The portfolio value of Mangrove Partners stands at $1.12 billion as of Q2 2021 and includes notable companies like Royal Dutch Shell plc (NYSE:RDS-A), Seelos Therapeutics Inc. (NASDAQ:SEEL), and Shaw Communications Inc. (NYSE:SJR).

Nathaniel August - Mangrove Partners
Nathaniel August - Mangrove Partners

Nathaniel August of Mangrove Partners

Our Methodology

In this article, we will be discussing the top 10 stock picks of Nathaniel August’s Mangrove Partners. These stocks have been picked from the second quarter portfolio of Nathaniel August’s Mangrove Partners.

10 Stock Picks of Nathaniel August’s Mangrove Partners

10. Carnival Corporation & plc (NYSE:CUK)

Mangrove Partners’ Stake Value: $9,226,000

Percentage of Mangrove Partners’ 13F Portfolio: 0.94%

Number of Hedge Fund Investors: 10

Carnival Corporation & plc (NYSE:CUK) is the world’s biggest cruise company based out of Miami, Florida. Mangrove Partners held 396,474 shares in Carnival Corporation & plc (NYSE:CUK) at the end of Q2 2021, worth $9.23 million.

The Anglo-American company has been under immense pressure during the COVID-19 pandemic as its operations were completely shut for two quarters and on the fringes of bankruptcy. However, the global cruise industry is expected to stage a comeback in 2022, and Carnival Corporation & plc (NYSE:CUK) is even taking bookings for the 2023 holiday season. As of October 2021, Carnival Corporation & plc (NYSE:CUK) has restarted 50% of its fleet through its eight leading cruising brands and plans to reach 65% capacity by the end of the year.

9. Companhia Energética de Minas Gerais (NYSE:CIG)

Mangrove Partners’ Stake Value: $11,095,000

Percentage of Mangrove Partners’ 13F Portfolio: 1.14%

Number of Hedge Fund Investors: 15

Companhia Energética de Minas Gerais (NYSE:CIG) is the sixth biggest electricity generation, transmission, and distribution company in Brazil. The Belo Horizonte, Minas Gerais-based company, is responsible for gas distribution, telecommunications services, and the provision of energy solutions. Companhia Energética de Minas Gerais (NYSE:CIG) has a production capacity of 6,086 megawatts through its 89 plants. Furthermore, the company has a transmission grid of 10,000 km.

Companhia Energética de Minas Gerais (NYSE:CIG) is working on spinning off 25% of Minas Gerais Gas Company (Gasmig), CEMIG’s natural gas distribution business, through an IPO. Any such activity will be beneficial for Companhia Energética de Minas Gerais (NYSE:CIG) as the company can use the IPO proceeds to lower its debt and also expand its business. However, the potential upside depends upon the recovery of the global economy from the coronavirus and the exchange fluctuation between the US Dollar and the Brazilian Real.

8. Dell Technologies Inc. (NYSE:DELL)

Mangrove Partners’ Stake Value: $11,136,000

Percentage of Mangrove Partners’ 13F Portfolio: 1.14%

Number of Hedge Fund Investors: 62

Dell Technologies Inc. (NYSE:DELL) is another organization on the list that is undergoing a corporate restructuring following the VMware, Inc. (NYSE:VMW) spinoff. The Round Rock, Texas-based tech giant, offloaded 81% of its stake in VMware. This will form an independent software company with a market capitalization of $64 billion.

On November 2, Tim Long at Barclays issued an Equal Weight rating on Dell Technologies Inc. (NYSE:DELL) with a price target of $59. The analyst believes that after the spinoff, Dell rose with a simplified structure and improved financials. The stock price of Dell Technologies Inc. (NYSE:DELL) has risen by over 90% YTD.

Third Point Management discussed its stance on Dell Technologies Inc. (NYSE:DELL) in its Q3 2021 investor letter. Here’s what the investment management firm said:

“Michael Dell has created substantial value for shareholders since re-listing the company several years ago. Earlier this year, Dell Technologies announced that it would be spinning its $50 billion stake in VMWare, which we believe will unlock the underappreciated value of the Dell server and PC businesses. Dell’s best attribute has been strong free cash flow generation, which the company has used to de-lever and create significant latent value for equity holders. Looking ahead, we believe this core Dell business, which still trades at a discount to its hardware peer group, should instead command a premium multiple thanks to its leading market share, profitability, and impressive execution. There are few large cap companies which possess a nearly 10% FCF yield, 2.5% dividend yield and 1.5x leverage ratio; Dell is one of them.”

7. Xilinx, Inc. (NASDAQ:XLXN)

Mangrove Partners’ Stake Value: $11,291,000

Percentage of Mangrove Partners’ 13F Portfolio: 1.16%

Number of Hedge Fund Investors: 59

Xilinx, Inc. (NASDAQ:XLNX) is the inventor and manufacturer of field-programmable gate array (FPGA), other programmable logic devices and offers a dynamic processing technology. In October 2020, Advance Micro Devices, Inc. (NASDAQ:AMD) announced that it would acquire the San Jose, California-based semiconductor company for $35 billion to expand its product portfolio.

Mangrove Partners held 78,060 shares in Xilinx, Inc. (NASDAQ:XLNX), worth nearly $11.3 million at the end of the second quarter of 2021. Overall, 59 hedge funds held a stake in Xilinx, Inc. (NASDAQ:XLNX), up from 57 in the first quarter.

6. Change Healthcare Inc. (NASDAQ:CHNG)

Mangrove Partners’ Stake Value: $16,209,000

Percentage of Mangrove Partners’ 13F Portfolio: 1.66%

Number of Hedge Fund Investors: 51

Change Healthcare Inc. (NASDAQ:CHNG) is a provider of healthcare technology through its Change Healthcare Platform. The company provides ways to get the best clinical, financial, and administrative outcomes through data and solution-driven analytics. The company was acquired by Optum, a UnitedHealth Group Incorporated’s (NYSE:UNH) subsidiary, for $8 billion or $25.75 per share.

Although the deal was expected to be closed by the second half of 2021, delays due to scrutiny by the DoJ have resulted in Change Healthcare Inc. (NASDAQ:CHNG) expecting to close the merger by February 22, 2022.

Out of the 873 hedge funds being tracked by Insider Monkey, 51 held a stake worth $1.84 billion in Change Healthcare Inc. (NASDAQ:CHNG) at the end of Q2 2021, compared to 56 hedge funds in the previous quarter.

In addition to Change Healthcare Inc. (NASDAQ:CHNG), Mangrove Partners also held stakes in companies like Royal Dutch Shell plc (NYSE:RDS-A), Seelos Therapeutics Inc. (NASDAQ:SEEL), and Shaw Communications Inc. (NYSE:SJR) at the end of Q2 2021.

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Disclose. None. 10 Stock Picks of Nathaniel August’s Mangrove Partners is originally published on Insider Monkey.