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Giovine Capital Cuts Equity Portfolio In Q4; Still Bullish on These Stocks

Giovine Capital is a California-based long/short equity hedge fund founded by Thomas A. Giovine in 1998. Mr. Giovine holds a M.S. in Finance from The Wharton School of the University of Pennsylvania and prior to founding Giovine Capital had worked as an investment banker at Morgan Stanley. Giovine Capital has recently submitted its 13F filing for the end of the fourth quarter, in which it disclosed an equity portfolio worth $68.74 million, significantly down from the $130.43 million that it was worth at the end of September. The filing also revealed that, during the fourth quarter, the fund reduced its holdings in 35 companies and sold off its entire stakes in eight stocks. According to our own calculations, Giovine’s 45 long positions in companies with market caps above $1.0 billion posted a weighted average loss of -3.2% in 2015. In this article, we are going to analyze Giovine Capital’s top five equity holdings at the end of the last year.

We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space and our research has shown that imitating some of the small-cap picks that smart money investors are collectively bullish on can help a retail investor outperform the market over the long run (see the details here).

Thomas A. Giovine
Thomas A. Giovine
Giovine Capital

#5 Walgreens Boots Alliance Inc (NASDAQ:WBA)

– Shares Owned by Giovine Capital (as of December 31): 30,746

– Value of Holding (as of December 31): $2.62 million

Giovine Capital reduced its stake in Walgreens Boots Alliance Inc (NASDAQ:WBA) by more than a half during the fourth quarter and the company moved to the fifth spot in the fund’s equity portfolio at the end of December. Walgreens’ stock has been on a gradual decline since it reached its lifetime high of $97.30 last year and, according to technical analysts, have entered oversold territory with a Relative Strength Index (RSI) reading of 28.4. On February 4, shareholders of Rite Aid Corporation (NYSE:RAD) approved the company’s $17.2 billion deal to be acquired by Walgreens Boots Alliance that was announced last year. However, analysts are still skeptical about the transaction as it is still being reviewed by the Federal Trade Commission and can face some antitrust hurdles. John Armitage‘s Egerton Capital Limited sold its entire stake of over 4.4 million shares of Walgreens Boots Alliance Inc (NASDAQ:WBA) during the fourth quarter.

#4 Lamar Advertising Co (NASDAQ:LAMR)

– Shares Owned by Giovine Capital (as of December 31): 45,547

– Value of Holding (as of December 31): $2.73 million

Despite Giovine Capital reducing its stake in Lamar Advertising Co (NASDAQ:LAMR) by 48% during the fourth quarter, the 15.86% rise that the stock registered during the same period helped Lamar Advertising Co (NASDAQ:LAMR) climb five spots in Giovine’s equity portfolio. Shares of the Lamar Advertising Co have slumped by 15.40% year-to-date. This decline has helped the annual dividend yield of the company to soar above 5% and pushed down its trailing price-to-earnings multiple below 12.50, making the stock attractive at current levels. For the fourth quarter, analysts expect the company to report EPS of $0.82 on revenue of $354.69 million, compared to EPS of $1.23 on revenue of $336.70 million it reported for the same quarter last year. Richard S. Pzena‘s Pzena Investment Management trimmed its stake in Lamar Advertising Co by 7% to 2.34 million shares between October and December.

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#3 Yahoo! Inc. (NASDAQ:YHOO)

– Shares Owned by Giovine Capital (as of December 31): 85,845

– Value of Holding (as of December 31): $2.85 million

Amid a 15% growth that Yahoo! Inc. (NASDAQ:YHOO)’s stock witnessed during the fourth quarter, Giovine Capital cut its exposure to the company by 14%. However, Yahoo! Inc. (NASDAQ:YHOO)’s shares have slid by some 18% since the beginning of 2016, despite rumors that the telecom giant Verizon Communications Inc. (NYSE:VZ) might acquire the company. On February 8, Verizon (NYSE:VZ) CEO, Lowell McAdam, confirmed that the company is indeed considering buying out Yahoo!. Also, earlier this month, Yahoo! announced a revitalizing plan, under which it expects to reduce its operating expenses by $400 million by the end of this year and slash 15% of its global workforce. According to recent media reports, the company has already started the layoff process. Jeffrey Tannenbaum‘s Fir Tree initiated a stake in Yahoo! during the third quarter by acquiring nearly 8.0 million shares of the company.

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#2 Lockheed Martin Corporation (NYSE:LMT)

– Shares Owned by Giovine Capital (as of December 31): 14.704

– Value of Holding (as of December 31): $3.19 million

While the broader market slumped during the third quarter of 2015, Lockheed Martin Corporation (NYSE:LMT) was one of the few large-cap stocks that bucked the trend and ended the quarter with gains. During the last three months of 2015, when shares of the company advanced by 5%, Giovine Capital cut its stake by 42%. On January 26, Lockheed Martin Corporation (NYSE:LMT) reported its fourth-quarter results with EPS of $3.01 on revenue of $12.90 billion, versus analysts’ expectations of $2.94 in EPS on revenue of $12.33 billion. Following the earnings release, analysts at JPMorgan Chase & Co. reiterated their ‘Neutral’ rating on the stock, but lowered their price target to $235 from $240. Michael Messner‘s Seminole Capital (Investment Mgmt) sold its entire stake of 193,745 shares of Lockheed Martin Corporation (NYSE:LMT) during the fourth quarter.

#1 Home Depot Inc (NYSE:HD)

– Shares Owned by Giovine Capital (as of December 31): 24,304

– Value of Holding (as of December 31): $3.2 million

Though Giovine Capital reduced its stake in Home Depot Inc (NYSE:HD) by 46% during the fourth quarter, the company still ended up as the fund’s largest equity holding at the end of the December, mainly due to the stock’s 15.6% rise. So far this year, shares of Home Depot Inc (NYSE:HD) have fallen by 14.4% and according to technical analysts, they are now trading at their most oversold technical levels since 2000. However, from a fundamental perspective, trading at 21.26 times earnings they seem to be fairly valued, compared to the industry average P/E of 18.61. On January 25, analysts at Deutsche Bank upgraded the stock to ‘Buy’ from ‘Hold’ and also raised their price target to $135 from $122.76. Egerton Capital Limited reduced its stake in Home Depot Inc (NYSE:HD) by 24% to 1.82 million shares during the October-December period.

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Disclosure: None

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