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Jonathan Barrett’s Luminus Management’s Return, AUM, and Holdings

Nina Zdinjak

Luminus Management is an investment management firm that was founded back in 2002. It provides offices in New York City, NY, and Houston, Texas. Paul Segal launched this fund aiming to invest in companies belonging to utility and energy-related sectors. He was Luminus Management's President and Portfolio Manager until 2011 when he became the Chief Executive Officer of LS Power, an investment and development company, which operates in energy infrastructure, power generation, and electric transmission sectors. At the beginning of his career, Paul Segal was employed as a generalist in the Mergers and Acquisitions Investment Banking Group at Smith Barney. He earned a B.S. with the highest honors in Bio-Chemical Engineering from Rutgers College of Engineering.

The current President and Portfolio Manager of Luminus Managament is Jonathan Dan Barrett, who is also Managing Director of LS Power Equity Advisors. He joined the fund back in 2003, prior to which he was a Director of Merger and Acquisitions Group at Salomon Smith Barney. Before he joined Salomon Smith Barney, Jonathan Barret was sharping his investment knowledge working in real estate investment. He graduated with honors in Accounting from the University of Witwatersrand (Johannesburg, South Africa).

Jonathan Barrett's Luminus Management’s Return, AUM, and Holdings

The fund applies low net, long/short investment strategy, mainly focusing on the public companies related to energy industries. To be more precise, Luminus Management prefers to invest in companies that belong to the following sectors:  drilling, engineering and construction, utilities, power, coal/steel, MLPs, refiners, and E&P. Before investing in any company, the fund makes thorough analyses combining external and in-house research.  Following its investment philosophy, the fund had a stable, positive performance throughout the last couple of years. Let’s take a look at some of its return figures.

For instance, its Luminus Energy Partners QP, LP delivered 12.36% in 2013, followed by an impressive 22.67% in 2014, and 3.21% in 2015. The next year it brought back 9.32%, and in 2017 it gained 3.39%. In a mostly challenging year for investors, 2018, Luminus Energy Partners QP, LP succeeded to maintain a notable performance, delivering 1.62% through October. The fund’s total return amounted to 578.31%, for a compound annual return of 12.3%. Its worst drawdown was 41.66.

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On December 31, 2108, Luminus Management’s equity portfolio was valued at $4.94 billion. Concentrating on specific sectors, the fund didn’t have among its first 10 positions any of the 30 Most Popular Stocks Among Hedge Funds. However, its portfolio and fourth quarter investment moves were more than interesting. So, let’s take a closer look at them on the next page.

The largest stake the fund disclosed in Berry Global Group Inc (NYSE:BERY), a manufacturer of a variety of rigid products, running in three sectors: Health and Hygiene  Specialties, Engineered Materials, and Consumer Packaging. Its position in the company was worth $288.57 million, on the account of 6.07 million shares outstanding. Berry Global Group has a market cap of $6.85 billion, and it is trading at a price-to-earnings ratio of 16.79. Over the last six months, the company’s stock gained 11.31%, and on February 26th it had a closing price of $52.54. In its last financial report for the quarterly period ended December 29th, 2018, the company disclosed net sales of $1.97 billion, compared to $1.77 billion in the same quarter of 2017. For the same quarter, Berry Global Group also reported a net income per diluted share of $0.66, versus a net income per diluted share of $1.20 for the corresponding quarter of 2017. The second biggest position, which occupied 4.74% of Luminus Management’s portfolio at the end of the fourth quarter was in Vistra Energy Corp (NYSE:VST). After the fund had lowered its position in it by 8%, the stake counted 10.25 million shares, with a value of $234.65 million. Vistra Energy has a market cap of $13.26 billion, and it is trading at a P/E ratio of 57.06. On February 26th it had a closing price of $26.28.

During the fourth quarter of 2018, Luminus Management initiated around 60 new positions, among which the biggest one was acquired in Exelon Corporation (NYSE:EXC). Amassing 1.92% of the fund’s portfolio, this position counted 2.1 million shares with a value of $95.33 million. Exelon is an American Fortune 100 energy company, and one of the best energy providers in the US. It is headquartered in Chicago, Illinois, and in 2017 it had revenues of $33.5 billion. Its operations cover everything in the energy universe – from power generation through energy sales and transmission, to delivery. In its last financial report for the fourth quarter of 2018, Exelon disclosed GAAP Net Income of $0.16 per share, down from $1.94 in the same quarter of 2017, and Adjusted Operating Earnings per share of $0.58, compared to $0.56 in the fourth quarter of 2017.  The company also introduced a 2019 non-GAAP operating earnings guidance range of $3.00 to $3.30 per share. Over the last six months, the company stock gained 10.92%, and on February 25th it had a closing price of $48.56. Exelon has a market cap of $47.09 billion, and it is trading at a price-to-earnings ratio of 23.42. Recently, Scotiabank reiterated its “Buy” rating on the stock, with a price target of $50, while SunTrust Banks reiterated its “Hold” rating on it, having a price target set at $49. Luminus Management made the second biggest investment during the fourth quarter of 2018 in Livent Corporation (NYSE:LTHM), one of the worlds biggest lithium technology companies. The fund obtained 4.1 million Liven’t shares, and in that manner established a position that was worth around $56.59 million. Livent has a market cap of $1.89 billion, and it is trading at a P/E ratio of 13.11.

Luminus Management lost faith in around 70 companies in its portfolio and decided to sell its entire positions in them. Among the largest stakes the fund had dropped during the fourth quarter were those in United States Oil Fund LP (NYSEARCA:USO), Duke Energy Corp (NYSE:DUK), and C.H. Robinson Worldwide Inc (NASDAQ:CHRW). The fund said goodbye to 500,000 United State Oil Fund’s shares, which were valued $776 million, to 1.72 million shares of Duke Energy, which carried a value of $137.27 million, and to 860,913 shares of C.H. Robinson Worldwide, which were worth $84.3 million.

Disclosure: None

This article was originally published at Insider Monkey.