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Sean Murphy’s Game Creek Capital’s Return, AUM, and Holdings

Nina Zdinjak

In 2008, Scott Mayo, son of an experienced investor Richard Mayo (who co-founded Boston-based money manager GMO) launched his own hedge fund called Game Creek Capital. The fund got the seed money from Richard Mayo, and it was run by Scott until his unfortunate death in 2010. Then, it was taken over by Sean Murphy, who was previously recruited from Vardon Capital Management by Scott Mayo. At Vardon Capital Management, Sean Murphy was a senior analyst having its main focus on telecom, media and consumer sectors. Before he got employed at Vardon Capital Management, he was a media analyst at Credit Suisse Boston. Presently, Sean Murphy is the President and Chief Investment Officer of Game Creek Capital, and a Chartered Financial Analyst. Once, when asked about his investment philosophy, he answered very simply: “If you’ve got a great idea, make it a real position”. He earned his B.A. cum laude from the University of Notre Dame.

Game Creek Capital employs an absolute return, long/short strategy mainly investing in the business from media, consumer, and telecom sectors. It uses bottom-up research to recognize companies that are currently undervalued. It invests in both mid and large cap stocks. According to its website -  capital preservation is their mantra. When analyzing a potential stock for its portfolio, Game Creek Capital reaches both current and former employees, customers, suppliers, competitors, and of course, the management team. It collects all data possible, trying to get the detailed picture of each company, in order to make a proper evaluation of it. At the end of June 2017, Game Creek Capital held $354.00 million in regulatory assets under management. Let’s take a look at what Game Creek Capital’s investment strategy brought back in the last couple of years.

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From January 2008 through May 2011, one of the fund’s long-short strategies delivered a compounded annualized return of 17.8% (or a cumulative return of 75.2%). Its Game Creek Fund, L.P. gained a great 19.70% in 2013, which was followed by a loss of 4.58% in 2014. Then, the next year, Game Creek Fund, L.P. came back on its feet posting positive returns of 3.23%. In 2016 it delivered 0.73%, and in 2017 it brought back 2.81%. Last year through October, the fund managed to stay positive generating a return of 3.62%. Game Creek Fund, L.P. had a total return of 191.77%, for a compound annual return of 11.2%. Its worst drawdown stood at 11.55.

On December 31st, 2018, Game Creek Capital’s portfolio was valued at $212.97 million, representing a 21.85% decrease from one quarter earlier, when the fund’s portfolio carried a value of $272.52 million. During the quarter, the fund said goodbye to 15 stocks from its portfolio and added 7 new positions. The largest position was in a Philadelphia-headquartered telecommunications conglomerate with a market cap of $177.28 billion, Comcast Corporation (NASDAQ:CMCSA). The company’s three main businesses are Comcast Cable, Sky, and NBCUniversal. Game Creek Capital held 294,350 Comcast’s shares, which were valued $10.02 million. Aside from being one of the US biggest high-speed internet, video, and phone providers, Comcast is also one of the 30 Most Popular Stocks Among Hedge Funds. It is trading at a price-to-earnings ratio of 15.50, and year-to-date,  the company’s stock gained 13.96%, having its closing price on March 11th of $39.17. In its last financial report for the fourth quarter of 2018, Comcast disclosed consolidated revenue of $27.84 billion or $0.55 per share, compared to revenue of $22.08 million or $3.17 per share in the corresponding period of 2017. At the end of January 2019, TD Securities raised its price target on the stock to $48.00 from $47.00 with a ‘Buy’ rating, and Credit Suisse Group restated its ‘Buy’ rating on the stock while keeping its price target of $44.00.

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If you are interested to read more about Game Creek Capital’s similar 4th quarter long positions and investment moves, head on to the next page.

Game Creek Capital held the second largest position in its portfolio in Hess Corp. (NYSE:HES), a global independent energy company that participates in both the production and exploration of natural gas and crude oil. This Big Apple-based company is one of the Fortune 500 corporations and has a market cap of $17.22 billion. At the end of the fourth quarter of 2018, the fund held 231,600 Hess’ shares, which carried a value of $9.38 million, accounting for 4.4% of the fund’s equity portfolio. Over the past 12 months, the company’s stock gained 14.96%, and on March 11th, it was trading at $55.93. At the end of January 2019, Morgan Stanley set the price target on Hess’ stock of $63.00, with a ‘Buy’ rating, while at the same time, Stephens downgraded its rating to “Equal Weight’ from ‘Overweight’, with a price target of $69.

The third biggest stake the fund held in Alphabet Inc Class A (NASDAQ:GOOGL), and this was $8.83 million worth a position, on the account of 8,450 shares outstanding. Alphabet has a market cap of $817.07 billion, and it is trading at a price-to-earnings ratio of 26.98. Its stock gained 0.65% over the past six months, and on March 11th it was trading at $1,179.26.

Among the 7 new positions Game Creek Capital initiated during the last quarter of 2018, the most valuable one was in an NYC-based video game holding company Take Two Interactive Software, Inc Common Stock (NASDAQ:TTWO). The fund purchased 42,300 Take Two’s shares, establishing in that manner a position in the company that was valued $4.35 million. Take Two is the owner of two large publishing brands – 2K (consisting of 2K Games and 2K Sports) and Rockstar Games. Over the last 12 months, Take Two’s stock lost 22.41%, and on March 11th, it had a closing price of $89.80. The company is trading at a price-to-earnings ratio of 28.23, and it has a market cap of $10.16 billion. For the three months ended December 31, 2018, Take Two reported GAAP net revenue of $1.249 billion, compared to $480,840 million in the same period of 2017. It also disclosed dilute earnings per share of $1.57, versus $0.21 in the corresponding quarter of 2017. On February 12th, 2019, BMO Capital Markets downgraded its rating on the stock to ‘Underperform’ from ‘Market Perform’ with a price target of $93.44, while MKM Partners lowered its price target to $115.00 with a ‘Buy’ rating on it.

Another large new stake the fund made during the last three months of 2018 was in Altice USA Inc (NYSE:ATUS), and it was worth around $4.21 million, on the basis of 255,000 Altice USA shares outstanding. Altice USA is a company that offers various system operator services and cable television. It is based in NYC while providing its professional services across 21 states. The company has a market cap of $15.21 billion, and it is trading at a price-to-earnings ratio of 615.30. Altice’s shares gained 27.33% since the beginning of the year, and on March 11th they had a closing price of $21.80 per share.

Out of 15 stocks the fund decided to drop in the last quarter of 2018 it held the largest stakes in TE Connectivity Ltd (NYSE:TEL),  Facebook, Inc. Common Stock (NASDAQ:FB), and Lennar Corporation Class B (NYSE:LEN.B). In that manner, Game Creek Capital dumped its $4.1 million worth a position in TE Connectivity (based on 46,400 shares), sold out 14,000 Facebook’s shares, which were valued $2.3 million, and said goodbye to a $1.53 million worth a position in Lennar Corporation (on the account of 39,669 shares outstanding).

Disclosure: None

This article was originally published at Insider Monkey.