Gotham Asset Management is a New York-based iconic value-focused long/short equity hedge fund founded by renowned value investor Joel Greenblatt in 1985. Having started its journey with $7 million in assets under management (AUM), in the 30 years since its inception Gotham Asset Management has grown to almost $18 billion in AUM. Between 1985 and 2006 the firm posted a spectacular annualized return of 40%. Gotham Asset Management recently has submitted its 13F filing with the SEC for the reporting period ended September 30, revealing an equity portfolio worth nearly $10.25 billion. The filing also revealed that by value-focused hedge fund standards the fund had a high quarter-over-quarter turnover of 54.81% during the July-September period and that its top 10 equity holdings accounted for 7.56% of its equity portfolio at the end of September. In this article we are going to analyze the top five stocks on which the fund was betting on going into the fourth quarter.
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. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about 6 basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 in real time and these stocks beat the market by 80 percentage points (102% return vs. S&P 500’s 48.7% gain) over the last 37 months (see the details here).
#5 Computer Sciences Corporation (NYSE:CSC)
– Shares Owned by Gotham Asset Management (as of September 30): 1.27 Million
– Value of Holding (as of September 30): $78 Million
Though the shares of Computer Sciences Corporation (NYSE:CSC) went down by 6% during the July-September period, the 5% increase of the stake, helped Computer Sciences Corporation (NYSE:CSC) to jump five spots quarter-over-quarter in Gotham’s portfolio. On November 30, the company announced the completion of the spin-off of CSRA Inc. (NYSE:CSRA) into a separate, publicly-traded company. Following the completion of the spin-off, the shares of both the companies have remained largely stable. On December 1, analysts at SunTrust downgraded the stock to ‘Neutral’ from ‘Buy’ and lowered their price target to $34 from $78. With an ownership of over 7.3 million shares of Computer Sciences Corporation, Barry Rosenstein‘s JANA Partners was the largest shareholder of the company among the funds tracked by Insider Monkey at the end of September.
#4 Spirit AeroSystems Holdings, Inc. (NYSE:SPR)
– Shares Owned by Gotham Asset Management (as of September 30): 1.62 Million
– Value of Holding (as of September 30): $78.3 Million
Owing mostly to the bull run that its stock saw during the first-half of the year, even after suffering a 12.28% decline during the third quarter Spirit AeroSystems Holdings, Inc. (NYSE:SPR)’s stock is still trading up by more than 20% year-to-date. Gotham Asset Management purchased an additional 85,535 shares of the company during the July-September period. The volatility of the third quarter also seemed to have given an opportunity to other hedge funds who were planning to go long in Spirit AeroSystems Holdings, Inc. (NYSE:SPR) to buy the stock at a reasonable price as the number of hedge funds with stakes in the company rose to 50 at the end of September from 45 at the end of June. Siddharth Thacker‘s Signpost Capital initiated a stake in the company during the third quarter by purchasing 225,821 shares.