Eclectic Mix of Stocks Added to WCG Management’s Portfolio

CalAtlantic Group Inc. (NYSE:CAA)

– Number of shares held by WCG Management as of March 31: 138,000

– Value of WCG’s holding as of March 31: $4.62 Million

The New York-based investment management firm added a 138,000-share position in CalAtlantic Group Inc. (NYSE:CAA) to its portfolio during the March quarter, which was worth $4.62 million at the end of March. CalAtlantic Group, which was created through the merger of homebuilders Standard Pacific Corp. and The Ryland Group in October 2015, constructs well-crafted homes in more than 40 metropolitan statistical areas. The diversified builder of single-family attached and detached homes had a significant amount of debt at the end of 2015, with the principal amount of its homebuilding senior notes outstanding reaching $3.38 billion. $280.0 million of this principal amount matures in 2016, while $1.03 billion of that amount matures between 2017 and 2018. Meanwhile, CalAtlantic Group had cash and cash equivalents of $363.29 million at the end of December. Shares of CalAtlantic are down by 10% since the beginning of 2016 and currently trade at a forward P/E multiple of 8.7, which is below the ratio of 12.0 for the Homebuilding industry. Ken Griffin’s Citadel Advisors had 4.19 million shares of CalAtlantic Group Inc. (NYSE:CAA) in its equity portfolio at the end of December.

Red Hat Inc. (NYSE:RHT)

– Number of shares held by WCG Management as of March 31: 69,000

– Value of WCG’s holding as of March 31: $5.13 Million

Barry Wittlin and his team found Red Hat Inc. (NYSE:RHT) to be an attractive investment opportunity in the first quarter of 2016, during which WCG Management purchased a new stake of 69,000 shares. The $5.13 million-position accounted for 6.20% of the fund’s equity portfolio at the end of March. The provider of open source software solutions has seen its market value decline by 10% year-to-date. Open source software, whose code is available for modification, represents an alternative to proprietary software, with Red Hat becoming a role model in this space. In mid-April, analysts at Pacific Crest upgraded Red Hat to ‘Overweight’ from ‘Sector Weight’, citing sales diversification with newer products such as OpenShift. Pacific Crest, which has a price target of $88 on the stock, said “Red Hat is increasingly winning large deals due to the strategic nature of its stack”. The company’s management recently stated a revenue target of $5 billion in the next five years, which implies a compound annual growth rate of 16%. The stock is priced at a hefty forward P/E ratio of 28.5, but the CAGR rate of 16% seems to justify this valuation. D.E. Shaw & Co., founded by David E. Shaw, owned 1.05 million shares of Red Hat Inc. (NYSE:RHT) on December 31.