By Pete Gallo
If this remarkable investment tale were being described by
the screenwriters of one of those 1960s rubber-suit Godzilla
flicks from Japan, an appropriate title might be "The Monster
of Eton Park." But there is nothing rubbery about the returns
Eric Mindich's Eton Park Fund has posted recently, thanks to
King Kong-sized sales of Monster Energy drink, distributed by
soft-drink maker Hansen Natural.
Filings with the Securities and Exchange Commission show
that Eton Park posted a recent gain in excess of $110 million
in Hansen Natural, making the stock one of the most convincing
portfolio wins so far this year.
Hansen's share price rose from a low of $21 in the fourth
quarter to a hefty $37 as of mid-March, bucking the downward
trend seen by many other makers and distributors of fizzy
drinks across the globe. But what makes Hansen's recovery this
year even more notable is that the Nasdaq-traded stock price in
mid-March actually reached levels of near-parity with its
former 52-week high of more than $38 set in April 2008 -
something few stocks have done.
You have to hand it to Mindich's investment team for
discerning Hansen's future profitability. SEC filings reveal
that Eton Park held some 5.6 million shares in the soft-drink
company as the stock bottomed out in December. Rather than
engaging in panic selling, Eton Park seemed to embrace a kind
of frantic buying, grabbing another 1.5 million shares in
Hansen to bring its total to 7.15 million shares, for a 7.7%
stake in the Corona, Calif., company.
It was a bold move, given the uncertainty Eton Park (and
everyone else for that matter) faced in the markets in the
final quarter of 2008. The firm wasn't betting on black but on
a tide of red ink.
Mindich's team did more than doggedly dig in its heels. Eton
Park capitalized on the buying opportunity and came out ahead -
way ahead. At 7.15 million shares, the value of the Hansen
position was poised to grow from $150.5 million from its
fourth-quarter low to about $264.44 million as of
Time to sell? Mindich's investment style doesn't suggest he
is in Hansen for a quick flip - nor would that be wise, no
matter how tempting. Eton Park is all about grabbing big stakes
in banner names, with any luck ones that have gotten hammered
by ephemeral market forces and sentiment, and that will become
momentum plays as their value is realized.
Hansen certainly seems to have both momentum and value in
its favor for the moment. In addition to enjoying solid results
stemming from its energy-drink and juice sales, the company
recently inked a deal with Mexican soft-drink distributor Grupo
Jumex to bring Hansen's Monster drink south of the border (and
into the resort areas of Baja and Cancun) to go head-to-head
with reigning energy-drink king, Red Bull.
Analysts are bullish on distributors like Hansen, because
for often smallish sums they can land distribution deals and
then invade new markets at low cost. (Of course this can
backfire too, as was the case in March, when shares of China
Huiyuan Juice Group fell 40% in a single day in Hong Kong on
news that a massive $2.4 billion deal with Coca-Cola was
blocked on antitrust grounds. Luckily for Eton Park, the fund
didn't have a stake in that deal.)
Eton Park's portfolio has another horse in the
liquid-stimulant race: coffee, the other low-cost, high-margin
consumable that many Americans can't seem to live without.
Mindich's shop owns 2.75 million shares in coffee retailer
Starbucks, filings with the SEC show.
Unlike Hansen, Starbucks has taken some serious lumps, and
not of the sugar, since the onset of the recession. At the
start of the third quarter, shares in the company were trading
at about $16 but bled down to roughly $8, a low set near the
end of 2008. But by tweaking coffee prices and garnering
savings by laying off baristas and shuttering stores, Starbucks
has once again bounced for Eton Park, which has held firm.
As of mid-March, the stock had risen to $11.50, following a
relatively smooth upward trajectory. At 2.75 million shares,
Eton Park's position in the coffee retailer was poised to grow
in value to $31.6 million, a gain of roughly $10 million since
Starbucks hit its December low.
Another round of $500 million in spending cuts, announced in
March by Starbucks, may lift the stock further. Perhaps
Mindich's investment team thinks they will; Eton Park recently
added 700,000 shares to the portfolio, according regulatory
Other notable large positions in the Eton Park portfolio
include News Corp., Goodyear Tire & Rubber and Best Buy, as
well as significant bets on gold and silver via exchange-traded