Editor’s Note: Related tickers: Citigroup Inc (NYSE:C), Hartford Financial Services Group Inc (NYSE:HIG), SLM Corp (NASDAQ:SLM), IntercontinentalExchange Inc (NYSE:ICE), The Blackstone Group L.P. (NYSE:BX)
Toscafund Asset Management is an asset manager based in London and Dubai. The firm was founded in 2000 by Martin Hughes and is part of Old Oak Group.The fund recently filed its first quarter 13F with the SEC, describing some of its main investments during the first three months of 2013. A quick look at Toscafund’s top five equity positions is a good place to start. See the original 13F here.
Why is this important?
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The top pick
Citigroup Inc (NYSE:C), the mammoth financial services company, is the largest holding disclosed in the 13F. Toscafund reduced its position by 171,000 units to 655,000 shares during the quarter, with the value of the holding falling by 11.32% to $28.977 million. Citigroup Inc (NYSE:C) has a forward P/E ratio of 9.65, with a diluted trailing EPS of $2.78 and a beta of 2.59. Analysts give the stock a mean recommendation of 2, and of the major four U.S. banks, Citi is the most globally focused. This added international growth potential is evident when looking at sell-side estimates on Citi; analysts predict the bank to generate EPS growth of 14% a year over the next half-decade.
The best of the rest
Next is Hartford Financial Services Group Inc (NYSE:HIG), with the fund holding 1,105,000 shares worth $28.508 million as of March 31, 2013,a drop in stake size and value of 14% and 1.13% respectively, when compared with the December quarter. The financial company’s stock trades at the tenth lowest forward P/E ratio in its industry at 8.73, and currently exhibits a beta of 3.08. Hartford Financial Services Group Inc (NYSE:HIG) has been a booming investment year-to-date, and while auto and homeowner insurance market share is declining, its risk portfolio has improved with age quite nicely. Mutual fund operations and Hartford Financial Services Group Inc (NYSE:HIG)’s property & casualty arena should provide the company with a nice tailwind moving forward, and is likely why Toscafund is bullish.
SLM Corp (NASDAQ:SLM) is the third largest investment of the fund,with the fund selling 206,250 shares during the quarter for a total holding of 987,750 worth $20.249 million as of March 31, 2013. The company has a trailing P/E ratio of 9.10, with a forward P/E of 8.99 and a beta of 1.28. The trailing EPS is $2.46. Analysts have a mean recommendation of 1.90 on SLM Corp (NASDAQ:SLM), and the most bullish of those on Wall Street expect a 9-10% upside from current levels. If housing stays strong, SLM Corp (NASDAQ:SLM)—Sallie Mae—can reach these estimates, and then some. Still, this is a macro-bet first and foremost.
Another financial services company,IntercontinentalExchange Inc (NYSE:ICE), is next on our list, with the fund holding stake of 87,329 shares as of March 31, 2013, an increase of 3,000 shares compared to one quarter earlier. Ice’s trailing P/E rests around industry norms at 23.78, while a beta of 0.95 is nicely juxtaposed with some of Toscafund other, riskier holdings. An above-average level of short interest and a slight declination in business activity in the fourth quarter of 2012 may have some bears clamouring, but for those banking on a future of derivatives trading free of Uncle Sam’s intrusion, now’s a good chance to buy on the dip.
A newcomer to the equity portfolio is The Blackstone Group L.P. (NYSE:BX), closing out the fund’s top five with a holding of 690,000 shares worth $13.648 million. The beta of the stock is 2.21, with annual EPS estimates trending close to the $1 mark. Trading at the third lowest forward P/E (8.26) in its industry,The Blackstone Group L.P. (NYSE:BX) offers a unique opportunity to own stake in a diverse organization at a bargain bin price. Though it’s known for its private equity dealings, The Blackstone Group L.P. (NYSE:BX) is also a nice play on the housing market comeback—a solid portion of its asset base is in commercial real estate.
Final remarks
Clearly, this fund has a strong focus on the financial sector, but the overarching theme we can gather from its top five holdings is that it’s bullish on a continuing housing market recovery. The Blackstone Group L.P. (NYSE:BX), Sallie Mae and Hartford Financial Services Group Inc (NYSE:HIG) offer nice value opportunities to boot, while IntercontinentalExchange Inc (NYSE:ICE) gives investors nice exposure to a derivative-heavy future, and Citigroup Inc (NYSE:C)’s international focus is its key selling point.
Disclosure: none
