July 18, 2012–Israel Englander established his investment firm, Millennium Management, in 1989 with $35 million. The company has close to $16 billion in assets under management. The investment strategies that the firm pursues include: relative value fundamental equity, statistical arbitrage/quantitative strategies, fixed income, and merger arbitrage/event driven. The firm runs a platform model whereby teams of investors are allocated funds to purchase shares based on a variety of investment strategies. Therefore, Millennium’s funds are collections of multiple portfolios. Interestingly, Millennium Management does not assess a management fee; it charges expense directly to the fund.
According to Forbes, in 2011, “Millennium International and Millennium USA returned 8.45% and 8.67% respectively net of fees.” The firm “has produced annualized net returns of 15% since 1990, suffering its sole down year in 2008.”
It had been reported that Englander, with a personal net worth estimated at some $2.3 billion, has sought a buyer for a minority stake in his firm. This step was viewed as an attempt to transform the company into an institutionalized business. The stake sale would broaden the firm’s ownership base and would create a possibility for Englander’s stake to be monetized.
Many of Millennium’s largest positions are stocks from the energy sector. Some of them pay attractive dividends. Here are Englander’s largest positions that pay dividends (click here to see charts)
Williams Companies LP (WMB) was the third largest position in Englander’s portfolio in the first quarter. Based on the number of shares reported in ownership in the first quarter, that stake is currently valued at nearly $79 million. This position was bolstered by 233% in the first quarter. The diversified master limited partnership (MLP) produces and processes natural gas and operates an extensive natural gas pipeline system in the U.S. It has a market capitalization of about $18 billion. The MLP has seen robust EPS growth averaging nearly 19% per year over the past five years. Analysts forecast that its EPS will grow at an average annual rate of 14.6% for the next five years.
Currently, this MLP pays cash distribution yielding 4.2% on a coverage ratio of 1.6x. The MLP is fully committed to increasing its dividend substantially in the next couple of years. Its management recently projected that it would boost its dividend each quarter in 2012 and then again in the subsequent two years. The overall increase in the payout would total 30% over the three-year period. The company’s peers Kinder Morgan, Inc. (KMI), Enbridge, Inc. (ENB), and Spectra Energy Corp(SE) pay yields of 3.9%, 2.8%, and 3.8%, respectively. At the time of writing, this MLP is trading at a discount to its industry on average. Its partnership units are changing hands at $29.90 a unit, up nearly 4% over the past 12 months. The stock is also popular with billionaire Leon Cooperman.
NiSource Inc. (NI) was the eighth largest position in Englander’s Millennium fund in the first quarter. Based on the number of shares reported in ownership in that quarter, the stake is presently valued at about $58 million. This position was upped by 92% in the first quarter. The company is a diversified natural gas transmission, storage, and distribution and electric power utility serving some 4 million customers in the U.S. The company’s EPS contracted at a rate of 3% per year over the past five years. The EPS is forecast to expand at an average rate of 5.3% per year for the next five years. NiSource has been operating at healthy margins currently exceeding historical averages. It has tapped rich shale gas reserves in the Utica/Point Pleasant Shale formation in northeast Ohio and western Pennsylvania. For that purpose, the company has recently entered into a joint venture with Hilcorp Energy Co. The two will construct natural gas liquids gathering pipeline and processing facilities.
NiSource pays a dividend yield of 3.9% on a payout ratio of nearly 100%. Its peers Dominion Resources, Inc. (D), Duke Energy Corporation(DUK), and FirstEnergy Corp. (FE) pay yields of 3.9%, 4.6%, and 4.5%, respectively. As regards to the firm’s valuation, on a forward P/E basis, the stock is trading on par with its industry. On Monday, the stock was changing hands at $25.15 a share, up 24% over the past year. Fund manager Louis Navellier (Navellier & Associates-check out its top picks) also holds a stake in the company…Read More>>