With a net worth of $1.3 billion, Marc Lasry manages the famous Avenue Capital Management. The fund lost 10 percent last year—the second worst year ever for hedge funds. Lasry invests in distressed companies and has also voiced some interest in European investments as long-term plays. He and his sister, Sonia Gardner, founded Avenue Capital with $7 million of their own capital.
According to the 13F document released on August 14, Avenue Capital has not shaken up its disclosed assets very much. Nevertheless, this fund—considered rather conservative by its peers—has some interesting positions.
Its largest single holding, by a landslide, remains Magnachip Semiconductor Corp (NYSE:MX), which has returned 80 percent year-to-date. The board recently increased its share repurchasing program by $25 million, extending it a year to October 2013. Total revenue for the second quarter 2012 was about $203 million, roughly flat year-over-year. Management expects revenue to increase 7 to 11 percent for the third quarter, and it has met its financial guidance for the past six straight quarters. Headquartered in South Korea, Magnachip Semiconductor Corp has 30 years of operating history and is a premier developer of analog and mixed-signal semiconductor products. The primary target of their arsenal of patents and products is the volume consumer electronics segment.
About 23 percent of Lasry’s fund is invested in either warrants or common stock of General Motors Company (NYSE:GM). We have discussed recently that the picture for GM is complex and, for the short-term investor, potentially deleterious. While we like the “cheap” price of 5.8 times forward earnings, we are less enthusiastic with the $25.4 billion shortfall in pension funds that the company faces. That said, the stock is presently trading at some of its lowest levels since its IPO, and management is rather scrupulously addressing its debts. As with his European investments, Lasry knows that he will need to be patient (i.e. 3 to 5 years patient) in order to see significant returns. However, he is in good company: David Einhorn’s Greenlight Capital and Warren Buffett’s Berkshire Hathaway have significant long positions in General Motors.
CIT Group Inc. (NYSE:CIT) is another major holding of the fund of about 530,000 shares. The company had a better than expected third quarter, reporting a loss of 35 cents per share, beating the analyst consensus estimate of 57 cents loss per share. The company emerged from bankruptcy in 2009 and has, since then, opened online consumer banking solutions, which provided $2 billion in deposits in 2011. Though the bank has in the past used primarily debt to finance its lending operations, it is hoping that deposits will begin to account for up to 45 percent of its total funding.
Avenue also has holdings in Verso Paper Corp (NYSE:VRS), a company that produces speciality paper for magazines, fliers, and catalogs. Though shares of the company are up 52 percent year-to-date, the stock lost about 70 percent of its value in 2011. TRW Automotive Holdings Corp (NYSE:TRW) is still in the fund’s top ten holdings, a position that has been trimmed significantly to about 420,000 shares from over 2 million shares at the end of 2010. Shares are down 25 percent since Lasry began decreasing the fund’s stake in the company.
Avenue liquidated its holdings in Tenet Healthcare Corporation (NYSE:THC), as did John Paulson’s Paulson & Co. The company also sold its holdings of Spectrum Brands Holdings, Inc. (NYSE:SPB) and Navistar International Corp (NYSE:NAV).
Lasry’s conservative approach has its appeal for investors looking for long-term value despite the sullen economic environment. The lack of a headline story with his 13F testifies, perhaps, to his conviction and compelling market outlook.