Investor's guide to Blue Ridge Capital's positions in 3Q 2013

Part 9
Investor's guide to Blue Ridge Capital's positions in 3Q 2013 (Part 9 of 11)

Why did Blue Ridge Capital move away from Equinix in 3Q 2013?

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According to 13Gs Blue Ridge Capital filed last month, the hedge fund disclosed new positions in Zulily (ZU) and PBF Energy (PBF). The filings stated that Blue Ridge currently owns 6.05% in Zulily, with 799,811 shares, and a 7.82% stake in PBF, with 3,095,000 shares.

A November 13G filing showed that Blue Ridge increased its position in Avis Budget Group (CAR) and at present owns a 6.17% stake, with 6,613,700 shares.

For more information on Blue Ridge Capital and its investment strategy, please see the last part of this series.

Blue Ridge Capital’s top new buys in 3Q 2013 per its 13F filing were American Homes 4 Rent (AMH), Tesla Motors Inc. (TSLA), Cliffs Natural Resources (CLF), and BlackBerry Ltd. (BBRY). The hedge fund exited its positions in Owens Corning (OC), Equinix Inc. (EQIX), and Realogy Holdings Corp. (RLGY).

Blue Ridge Capital’s two largest stock holdings are Priceline.com Inc. (PCLN) and American International Group Inc. (AIG), which account for 4.88% and 4.52% of the hedge fund’s portfolio, respectively.

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Why did Blue Ridge sell Equinix (EQIX)?

Blue Ridge sold a 2.49% position in Equinix Inc, a global data center services company, in 3Q 2013. Blue Ridge had initiated a position in the company in 3Q 2009.

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In September 2012, Equinix’s board approved the conversion to a REIT, and the conversion is scheduled to complete in January 2015. The stock took a dive in 2Q 2013 after news reports that the Internal Revenue Service was scrutinizing Equinix’s eligibility for REIT status. A REIT conversion is expected to benefit the company, as REITs pay lower taxes and higher dividends than other companies. In November, both Equinix and its peer, Iron Mountain Inc. (IRM), said the IRS is proceeding to evaluate their eligibility. Equinix believes it’s eligible for REIT status “based on both existing legal precedent and the fact that other data center companies currently operate as REITs.” These include CoreSite Realty (COR), Digital Realty Trust (DLR), and DuPont Fabros Technology (DFT). The stock was down 14% in 2013.

The company reported a profit in 3Q 2013 that was above analyst estimates. Revenues were $540.5 million for the quarter, a 3% increase over the previous quarter and an 11% increase over the same quarter last year. Equinix recently announced a share repurchase program of up to $500 million through December 31, 2014.

Equinix, Inc., connects more than 4,400 companies directly to their customers and partners inside the world’s most networked data centers.

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