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Billionaire Wilbur Ross’ Top Picks and New Positions

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Billionaire Wilbur Ross Jr., widely known as a connoisseur of failed companies, has built his entire career around investing in distressed assets. The contrarian American billionaire is the Chairman and Chief Strategy Officer of New York-based WL Ross & Company, which is a wholly-owned subsidiary of Invesco Ltd. (NYSE:IVZ). Wilbur Ross, who has made a fortune betting on the Irish banking system and distressed assets in industries such as steel, textiles and coal, primarily seeks out businesses that underperform their operational and financial capabilities. He is a strong believer in the value investing principles laid out by Benjamin Graham and David Dodd. This is a strong reason for tracking his quarterly 13Fs, which surely disclose high-potential, fundamentally cheap stocks. That being said, the following article will discuss the top three equity holdings of the billionaire investor and the two new additions added to his highly concentrated portfolio during the fourth quarter of 2015.

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).

Wilbur Ross
Wilbur Ross
Invesco Private Capital (WL Ross)

Let’s begin our discussion with Wilbur Ross’ largest equity position at the end of December 2015, represented by Navigator Holdings Ltd (NYSE:NVGS). WL Ross & Company owned 21.86 million shares of Navigator on December 31 worth $298.44 million. The owner and operator of handysize liquefied gas carriers has seen its share price decline by 22% over the past year. The company’s fleet comprises 38 vessels, which include 11 newbuilding vessels that are scheduled for delivery by March 2017. Navigator Holdings Ltd (NYSE:NVGS)’s operating revenue for the nine months that ended September 30 totaled $236.6 million, up by $10.1 million year-over-year. The increase was mainly attributable to a higher weighted average number of vessels, which was partially offset by a reduction in fleet utilization and market instability that caused delays in decision making. The shares of Navigator are currently trading at eight-times expected fiscal 2016 earnings, below the forward P/E multiple of 15.75 for the S&P 500 Index. Clint Carlson of Carlson Capital LP owns 1.10 million shares of Navigator Holdings Ltd (NYSE:NVGS) as of December 31.

Billionaire Wilbur Ross holds nearly 4.26 million shares of Sun Bancorp Inc. (NASDAQ:SNBC) as of the end of 2015, which were valued at $87.84 million on December 31. The position did not incur any adjustments during the final quarter of 2015. Sun Bancorp operates as a bank holding company for national bank Sun National Bank. The holding company’s stock is up by 11% over the past 12 months and trades at a whopping forward P/E ratio of 28.77, which is significantly above the average of 10.70 for the Regional Banks sector. Sun Bancorp Inc. (NASDAQ:SNBC)’s net interest income for 2015 totaled $60.60 million, down from $77.95 million reported for 2014. However, the company’s asset quality has been strengthening over the past several quarters, as its non-performing loans held-for-investment decreased to $3.1 million on December 31 from $3.7 million on September 30 and $11.0 million on December 31, 2014. A total of five hedge funds in our system had stakes in the company at the end of December, amassing 30.20% of its outstanding common stock. Emanuel J. Friedman’s EJF Capital upped its stake in Sun Bancorp Inc. (NASDAQ:SNBC) by 2% during the December quarter, to 1.03 million shares.

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