In its latest 13F filing with the U.S. Securities and Exchange Commission, Centerbridge Partners, led by Mark T. Gallogly, disclosed the holdings in its public equity portfolio, which was valued at $1.66 billion as of the reporting date of March 31. New York City-based Centerbridge Partners is a private investment firm that focuses on private equity and credit investments. The firm was founded by Jeffrey Aronson and Mark Gallogly in 2005. Well-informed sources revealed that Centerbridge Partners is preparing its hedge funds for new capital for the first time in several years, as the firm wants to raise funds for possible big opportunities in the future. In this piece we’ll take a look at the top small-cap stocks in which Centerbridge Partners also sees opportunity, which are Extended Stay America Inc (NYSE:STAY), Ambac Financial Group Inc. (NASDAQ:AMBC), and Quad/Graphics Inc. (NYSE:QUAD).
Insider Monkey has more than 700 hedge funds and investors in its database, including Centerbridge Partners. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. These stocks were able to generate alpha because of their lower risk profile. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month. These stocks were slightly riskier, so their monthly alpha was 80 basis points (read the details here). Since the official launch of our small-cap strategy in August 2012 it has performed just as predicted, returning over 144% and beating the market by more than 84 percentage points.
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The top small-cap stock pick of Centerbridge Partners is Extended Stay America Inc (NYSE:STAY), a $4.03-billion owner and operator of branded hotels in North America. Extended Stay America Inc (NYSE:STAY) also ranks as Centerbridge’s top holding in terms of value by a significant margin. As of the end of the first quarter, the firm held 47.66 million shares of the company, worth $930.83 million. The stake remained unchanged over the course of the first quarter. The company pays a quarterly dividend of $0.17 for a yield of 3.44%. For the first quarter of 2015, Extended Stay America Inc (NYSE:STAY) posted revenues of $287.6 million, a 6.4% increase compared to the first quarter of 2014. Net income during the quarter rose to $27.9 million from $16.1 million in the same period last year. During the past 12 months, the company’s stock declined by 11.97%. Paulson & Co, run by John Paulson, held an identical position of 47.66 million shares of Extended Stay America Inc (NYSE:STAY) at the end of the first quarter.
