Kenneth Squire established 13D Management in late 2011 and is still serving as the fund’s Chief Investment Strategist. Prior to that, he managed a subscription-based research company with an emphasis on activist investing and 13D filings, which is still active. 13D Management is a long-only fund that employs a strategy similar to that of Insider Monkey. It identifies investment opportunities mainly by analyzing 13D filings of prominent investors with proven track records and solid reputation. At the end of the second quarter, the fund’s equity portfolio carried a market value of $243 million and was well diversified across a number of industries. According to its latest 13F filing, 13D Management made only four new additions to its portfolio, so in this article we’ll take a look at these moves, as well as its new top equity bet.
While there are many metrics that investors can assess in the investment process, hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor beat the S&P 500 by around 95 basis points per month (see more details here).
First up is Armstrong Flooring Inc (NYSE:AFI), the maker of flooring solutions. According to its latest 13F filing, 13D Management acquired 71,134 shares of the company during the second quarter, a position valued at approximately $1.21 million. Hedge fund interest in Armstrong Flooring Inc (NYSE:AFI) picked up during the second quarter, with 16 of the funds followed by Insider Monkey having reported a stake in the company at the end of June, up from just one registered three months earlier. Jeffrey Ubben‘s ValueAct Capital, another activist hedge fund, has also initiated a stake in the company, having amassed 4.6 million shares worth $77.9 million. The large increase in hedge fund interest is also due to the fact that Armstrong Flooring Inc (NYSE:AFI) started trading shortly before the end of the first quarter, completing a spin-off from parent Armstrong World Industries Inc (NYSE:AWI). Since then, the stock has made a solid advance, having ended Monday’s trading session at $18.86 per share, up by more than 40%. For the second quarter, Armstrong Flooring posted $323.7 million in revenue and adjusted earnings of $0.41 per share, topping Wall Street’s expectations of $0.40 per share.
Imperva Inc (NYSE:IMPV) is another stock Kenneth Squire is bullish on, having initiated a position that amounted to 150,000 shares worth roughly $6.45 million at the end of the second quarter. Hedge fund sentiment towards Imperva Inc (NYSE:IMPV) improved significantly over the quarter, with the number of long hedge fund positions having increased to 21 at the end of June, from 15 at the end of March. Billionaire Paul Singer is also optimistic about the prospects of this company, as his fund, Elliott Management, reported a fresh stake in its latest 13F filing, that amounted to 2.33 million shares. Elliott’s stake is activist by nature and has stated in a filing that it would look at a wide range of strategic moves to increase shareholder value, including a potential sale of the company. In July Imperva Inc (NYSE:IMPV) hired Qatalyst Partners, an investment bank, to advise in on selling itself after registering some unsolicited interest. There is speculation that Cisco Systems, Inc. (NASDAQ:CSCO) could make a move, although International Business Machines Corp. (NYSE:IBM) is also seen as a potential buyer.
Turn the page to read about 13D Management’s two new bets as well as the number one position.