Steve Pei’s Gratia Capital disclosed last week its long equity positions as of June 30, 2014. The fund´s second quarter portfolio, which has a market value of more than $195 million, is focused on financial stocks (40%) and consumer discretionary stocks (20%). Over the period, Gratia started 19 new stock positions, increased its stakes in 12 of its preexisting holdings, and sold out of 15 previously held positions. In this article, we will take a look at the fund’s top 3 positions, which changed considerably over the quarter.
Mr. Pei’s largest bet was placed on Forestar Group Inc. (NYSE:FOR), which ascended from the ninth position that it occupied by the end of the first quarter. This $698 million market cap real estate, and oil and gas company saw Gratia Capital purchase 122,152 shares over the quarter. After increasing its stake by 31%, the fund owns 506,692 shares of Forestar Group Inc. (NYSE:FOR), worth almost $10 million.
Jeffrey Bronchick’s Cove Street Capital also boosted its exposure to Forestar Group Inc. (NYSE:FOR) over the second quarter of the year. The fund disclosed ownership of 1.56 million shares of the company, worth almost $30 million, following a 12% increase in its position.
As outlined in a previous article, the stock was trading close to the low end of its 52-week range during the first two months of the second quarter. This provided an attractive entry point for investors, and it looks like both Mr. Pei and Mr. Bronchick took advantage of this situation. Since early-June, however, the stock has started inching, and has returned more than 17% -between June 4 and August 11.
Second on this list – although the fund trimmed its exposure by 30% over the quarter – is Service Corporation International (NYSE:SCI), a $4.5 billion market cap provider of deathcare products and services in North America. Gratia Capital disclosed ownership of 414,042 shares of the company, worth roughly 8.5 million, which account for more than 4.3% of its total equity portfolio.
David Cohen and Harold Levy’s Iridian Asset Management is placing even larger bets on Service Corporation International (NYSE:SCI). This fund, which is the largest hedge fund shareholder of record (amongst those we track), disclosed an 11% increase in its exposure to the company over the second quarter. Iridian now owns 8.08 million shares of Service Corporation International (NYSE:SCI), with a market value of more than $167 million.
Dominion Diamond Corp (NYSE:DDC), formerly known as Harry Winston Diamond Corporation, is the last company in this list. This $1.2 billion market cap diamond mining company felt Gratia Capital’s bullishness over the second quarter, as the fund upped its bet by 20%, to 569,556 shares. The fund had started a position at Dominion Diamond Corp (NYSE:DDC), with 473,350 shares, over the first quarter of the year. Its current stake is worth roughly $8.2 million, and accounts for 4.2% of the fund’s equity portfolio’s total market value.
Another major hedge fund manager that seems bullish on Dominion Diamond Corp (NYSE:DDC) is Mario Gabelli. His fund, Gamco Investors, acknowledged a 12% increase in its stake in the company over the second quarter. Gamco now holds 349,000 shares of the company.
Disclosure: Javier Hasse holds no position in any stocks or funds mentioned