DaVita HealthCare (DVA), Hospira (HSP), Berkshire Hathaway (BRK.A) Lead LMR Partners’ Portfolio Into Q2

Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners has filed its latest 13F, and there has been a good deal of turnover in the fund’s equity portfolio, which is consistent with its investment philosophy. The London, England-based fund, which was co-founded by the three men in 2009, focuses on maintaining liquidity and seeking opportunistic methods of capital allocation that take advantage of short-term market opportunities. LMR Partners is just one of more than 700 hedge funds that we have in our database, whose equity portfolios we collate quarterly as part of our small-cap strategy. Even though most smaller investors believe that tracking 13F filings is a fruitless endeavor because they are filed with a delay of 45 days after the end of a calendar quarter, the results of our study prove that is not the case. To be on the safe side, we used a delay of 60 days in our backtests that involved the 13F filings of funds between 1999 and 2012 and we still managed to gain an annual alpha in the double digits. Moreover, since the official launch of our strategy in August 2012, our small-cap strategy has obtained returns of more than 137%, beating the S&P 500 Total Return Index by 80 percentage points (see the details).

The turnover in LMR Partners’ equity portfolio is immediately apparent from its top pick DaVita HealthCare Partners Inc (NYSE:DVA). This was only the eighth position in the fund’s portfolio heading into 2015, yet vaulted to the top of it a quarter later, despite the position actually being lowered during the first quarter, by 23% to 180,016 shares valued at $14.63 million. Nor did DaVita HealthCare Partners Inc (NYSE:DVA) rise because of a big quarter for the stock. It had solid first quarter returns of 7.31%, but that wasn’t nearly enough to explain its new top spot in LMR’s portfolio. Instead, it rose to the top entirely through the larger selloffs of the previously held top seven positions, which included former top pick HCA Holdings Inc (NYSE:HCA), which was sold-off completely during the first quarter. DaVita is not a stock to be taken lightly however, and stood as one of the only top picks of Warren Buffett to have strong returns last quarter.

Buffett held a massive $2.92 billion position in DaVita HealthCare Partners Inc (NYSE:DVA) as of the end of 2014. In second spot in LMR’s portfolio is Hospira, Inc. (NYSE:HSP), a position in which the fund previously held just over 22,000 shares, but increased that position to over 166,000 shares during the first quarter. The massive gains of Hospira, Inc. (NYSE:HSP)’s shares also contributed to its jump in value, with the position now being worth $14.63 million. Shares soared by more than 43% for the quarter following the announcement that Pfizer Inc. (NYSE:PFE) would acquire the pharmaceutical company for $90 per share. Without knowing when LMR’s shares were  purchased during the quarter it’s unknown just how much they profited from the deal. We do know that James Pallotta’s Raptor Capital hit a homerun with the deal, as his fund had over 13% exposure to Hospira, Inc. (NYSE:HSP)’s stock, the highest in our database.