Anthony Scaramucci’s Skybridge Capital Discloses Its Equity Holdings for the First Time; Here Are Its Top Bets

Anthony Scaramucci-led Skybridge Capital recently submitted its first 13F filing with the Securities and Exchange Commission (SEC), revealing a U.S equity portfolio worth $208.28 million as of December 31. Mr. Scaramucci is one of the most well-known figures in the investment world today, owing to the many successes he has had in his almost three decade-long career on Wall Street. After obtaining his J.D. from Harvard Law School in 1989, he began working for Goldman Sachs’ investment banking division. In 1996, he left his job as a vice president at the bank’s wealth management unit to start Oscar Capital Management along with his Goldman Sachs colleague Andrew Boszhardt. They sold Oscar Capital Management to Neuberger Berman in 2001 and after Neuberger Berman was acquired by Lehman Brothers in 2003, Mr. Scaramucci became a managing director at the bank’s Investment Management division.

In 2005, Mr. Scaramucci founded Skybridge Capital, a global alternative investment firm specializing in a fund of funds (FOF) investment strategy. Since its inception, Skybridge Capital has grown from $300 million in assets under management (AUM) to over $12.5 billion in AUM as of February 2015. Scaramucci is also the creator and host of one of Wall Street’s most coveted events, the SkyBridge Alternatives (SALT) Conference and an author of bestselling books like ‘The Little Book of Hedge Funds: What You Need to Know About Hedge Funds but the Managers Won’t Tell You’. After SkyBridge Capital acquired the licensing rights of the famous investment news and information TV program Wall Street Week (WSW) in 2014, Mr. Scaramucci re-launched the show in April 2015 and has been co-hosting it since then (we have profiled some of the show’s interviews in past articles). In this article we are going to take a look at Skybridge Capital’s top five stock picks going into 2016 and try to decipher why the fund is betting on them.

We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about 6 basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas (see the details here).

#5 Reynolds American, Inc. (NYSE:RAI)

– Shares Owned by Skybridge Capital (as of December 31): 188,964

– Value of Holding (as of December 31): $8.72 million

Shares of tobacco major Reynolds American, Inc. (NYSE:RAI) are continuing their upward march this year. While the stocks of most large-caps are trading deep in the red for the year, Reynolds American, Inc. (NYSE:RAI)’s stock is up by 3.55% year-to-date, despite the fact that the company reported mixed earnings for the fourth quarter on February 11. While analysts were expecting Reynolds American, Inc. to report EPS of $0.50 on revenue of $3.04 billion, it declared EPS of $0.48 on revenue of $3.05 billion. Since the company has been consistently increasing its dividend year-after-year, despite the almost 100% rise its shares have had since the beginning of 2014, it still sports an attractive annual dividend yield of 3.51%. David Winters‘ Wintergreen Advisers reduced its stake in Reynolds American, Inc. by 11% to 2.47 million shares during the October-to-December period.

#4 McDonald’s Corporation (NYSE:MCD)

– Shares Owned by Skybridge Capital (as of December 31): 73,949

– Value of Holding (as of December 31): $8.74 million

Taking into account that the broader market has slumped by nearly 9% this year, McDonald’s Corporation (NYSE:MCD) is emerging as another winner for Skybridge Capital this quarter, with its shares currently trading flat for the year. The company recently reported better-than-expected quarterly numbers on the back of a 5.7% increase in U.S comparable-store sales during the fourth quarter. Though revenue for the quarter declined by 3.5% year-over-year to $6.34 billion, EPS increased by 16% to $1.31. On January 27, analysts at Argus upgraded the stock to ‘Buy’ from ‘Hold’ and also raised their price target on it to $140 from $120.43. However, there are also a lot of analysts which feel the stock has become overvalued due to its recent run and that it might correct or consolidate in the medium-term as a result. To support their argument they cite McDonald’s Corporation (NYSE:MCD)’s current trailing price-to-earnings multiple of 24.52, which is considerably above its historical average P/E of 17.20. John A. Levin‘s Levin Capital Strategies almost halved its stake in the company during the fourth quarter, to 892,698 shares.

The top three picks of Mr. Scaramucci’s firm are unveiled on the next page.

#3 Abercrombie & Fitch Co. (NYSE:ANF)

– Shares Owned by Skybridge Capital (as of December 31): 325,195

– Value of Holding (as of December 31): $8.78 million

Moving on to Skybridge Capital’s third-largest equity holding, Abercrombie & Fitch Co. (NYSE:ANF), shares of the apparel retailer have been on a consistent decline since 2011 and are down by 8.26% so far this year. According to analysts this trend is likely to continue in the future, as the company enjoys no competitive advantage in the crowded apparel retailing industry and has been continuously losing its appeal among teen consumers. Despite the declines, the stock still trades at a forward price-to-earnings multiple of 21, while its peers trade at a multiple of 10.8 on average, thus analysts believe the stock is still highly overvalued right now. For the fourth quarter analysts are expecting the company to report EPS of $0.99 on revenue of $1.12 billion, a mixed bag compared to the EPS of $1.15 on revenue of $1.10 billion that it reported for the same quarter of 2014.

#2 General Electric Company (NYSE:GE)

– Shares Owned by Skybridge Capital (as of December 31): 282,364

– Value of Holding (as of December 31): $8.8 million

Investors applauded General Electric Company (NYSE:GE)’s efficiency in disposing of its financial arm last quarter, sending its shares up by 23.5%. However, due to the slump in the broader market, including fears of a global recession and the company’s exposure to China, the stock is currently trading down by 9.31% year-to-date. For the fourth quarter the company managed to beat the consensus earnings estimate of $0.49 per share, declaring EPS of $0.52, but revenue of $33.8 billion fell well short of the consensus estimate of $35.9 billion. Citing the company’s 7% organic growth during the quarter despite the weakness in the global economy, most analysts who track the stock remain bullish on it. For example, on February 5, analysts at Credit Suisse reiterated their ‘Outperform’ rating and $34 price target on the stock.

#1 Microsoft Corporation (NASDAQ:MSFT)

– Shares Owned by Skybridge Capital (as of December 31): 171,854

– Value of Holding (as of December 31): $9.53 million

Finally, let’s review Skybridge Capital’s top stock pick heading into 2016, Microsoft Corporation (NASDAQ:MSFT). After rising by over 24% during the fourth quarter, shares of the software behemoth have given up almost half of those gains this year. Most of the decline it has suffered in 2016 has come over the last few days and has occurred despite the company reporting strong numbers for its second quarter of fiscal year 2016 on January 28. Whereas analysts had projected it to report EPS of $0.71 on revenue of $25.24 billion for the quarter, Microsoft Corporation (NASDAQ:MSFT) declared EPS of $0.78 on revenue of $25.70 billion. In the last few months the company has been trying to cut its exposure to the mobile hardware market, while at the same time solidifying its presence in the mobile software space. Earlier this month it acquired third-party keyboard app ‘SwiftKey’, which is its fourth major mobile acquisition in the last 14 months. Meanwhile, according to recent reports, Microsoft will be soon pulling the plug on its ‘Lumia’ brand of smartphones. Billionaire Ken Fisher‘s Fisher Asset Management increased its stake in Microsoft Corporation by 1% to nearly 18.22 million shares during the fourth quarter.

Disclosure: None