Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Charles Davidson’s Wexford Capital Is Bullish on these Stocks

Charles Davidson co-founded Wexford Capital in 1994. Today he serves as the fund’s Chairman and Chief Investment Officer. He is responsible for the fund’s overall strategy. He also serves as the senior portfolio manager for Wexford Spectrum Funds and Wexford Catalyst funds. Before co-founding Wexford Capital, Davidson cut his teeth working for ten years (1984-1994) in fixed income arbitrage, risk arbitrage, private equity, distressed/bankruptcy and special situation investments as General Partner for Steinhardt Partners. Before that, Davidson spent seven years (1977-1984) as head of domestic corporate bond trading and proprietary trading at Goldman Sachs. Davidson’s experience shows through in Wexford Capital’s investment style, which the firm itself describes as contrarian and opportunistic.

According to a 13F filed on February 14, at the end of the fourth quarter, Charles Davidson’s Wexford Capital had 470 positions in its portfolio, with a total value of $855.07 million. The largest of these positions, by far, is Wexford’s stake in Rhino Resource Partners (RNO). The fund had over $150.99 million in the company (or 8.55 million shares) at the end of December. Then, in early January, Wexford upped its stake in Rhino Resource Partners to 19.98 million shares, representing a 72.1% activist stake in the company. As of the open of trading on February 14, Rhino Resource Partners was trading at $19.79 a share on a one-year target estimate of $24.83 a share (range $20 to $29). In addition to the upside, Rhino Resource Partners pays a high dividend of $1.92 a share (9.80% yield) – and it is priced low, at just 9.98 times its forward earnings.

Alpha Natural Resources, Inc. (NYSE:ANR)

Rhino Resource Partners’ forward P/E sounds even better when compared to its competitors. Alpha Natural Resources (ANR), for instance, is priced at 23.47 times its forward earnings. And, while the company may have a more projected upside in its stock price – the company opened trading on February 14 at $20.49 a share on a mean one-year target estimate of $30.84 – it doesn’t pay any dividends. The combination of these factors indicates clearly that Rhino Resource Partners is the better deal. We recommend the stock for risk-averse investors, looking for moderate growth and high dividends.

Charles Davidson’s Wexford Capital is also bullish about Energy Partners LP (EPL). The fund had $82.76 million, or just under 7.09 million shares, in the company at the end of the fourth quarter, up from a value of $62.74 million (roughly the same number of shares) at the end of the third quarter. Davidson is in good company with this stock – both David Einhorn’s Greenlight Capital and Clint Carlson’s Carlson Capital like this stock. The company is small, with a market cap of just $652.59 million but it is a great investment. When the company opened trading on February 14, it was priced at $16.59 a share and it carries a mean one-year target estimate of $21.15 a share (range $17 to $23). It is also priced at just 8.71 times its forward earnings – a real bargain considering that the stock has returned 10.63% over the last 52 weeks, versus 1.79% for the S%P 500, and its earnings are expected to grow by 368% this year and 61.50% next year.

The outlook for Energy Partners doesn’t fade by looking at its competitors either. Forest Oil (FST) is a close competitor with its $1.51 billion market cap, compared to Energy Partners’ $652.59 million – but Energy Partners has much higher growth. It reports quarterly revenue growth of 50.80%, compared to Forest Oil’s -0.60%. Energy Partners is also the winner with regard to its pricing. Forest Oil has a much higher forward P/E of 13.11. We like Energy Partners and expect good things for the little company, especially over the next couple years.

Charles Davidson is bullish about United Continental Holdings (UAL). His Wexford Capital had a stake of 2.33 million shares, worth roughly $43.90 million, in the company at the end of the fourth quarter. United Continental was trading at $23.79 at the open of trading on February 14, on a mean one-year target estimate of $33.58 a share. The company is priced extremely low, with a forward P/E of just 3.83. In comparison, rival Delta (DAL) has a forward P/E of 4.07 and considerably less expected upside. The stock opened February 14 at $11.10 a share on a one-year target estimate of $14.69. We prefer UAL over Delta however airlines stocks historically have been a very efficient value destruction machine. They are highly cyclical and analyst estimates aren’t always accurate. That’s why we don’t recommend them to risk-averse investors.

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!