According to a recent 13G form filed with the Securities and Exchange Commission, Christian Leone‘s Luxor Capital Group has acquired an additional 4.26 million shares of Northstar Realty Finance Corp (NYSE:NRF) through affiliated funds, taking its total stake to 17.44 million shares. The holding amasses about 5.03% of the company’s outstanding shares.
Leone launched Luxor Capital in 2002 with the intention of investing in equity and fixed income securities throughout the world. The fund employs a value-based approach when analyzing investment targets and has a penchant for distressed companies. Regulatory assets under Luxor’s management currently stand at $11.5 billion, while the market value of its public equity portfolio stood at $6.19 billion at the end of the first quarter. About 49% of the value of the holdings belonged to the finance sector.
Follow Christian Leone's Luxor Capital Group
An everyday investor does not have the time or the required skill-set to carry out an in-depth analysis of equities and identify companies with the best future prospects like a fund with the knowledge and resources of Luxor can. However, it is also not a good idea to pay the egregiously high fees that investment firms charge for their stock picking expertise. Thus a retail investor is better off to monkey the most popular stock picks among hedge funds by him or herself. But not just any picks mind you. Our research has shown that a portfolio based on hedge funds’ top stock picks (which are invariably comprised entirely of large-cap companies) falls considerably short of a portfolio based on their best small-cap stock picks. The most popular large-cap stocks among hedge funds underperformed the market by an average of seven basis points per month in our back tests whereas the 15 most popular small-cap stock picks among hedge funds outperformed the market by nearly a percentage point per month over the same period between 1999 and 2012. Since officially launching our small-cap strategy in August 2012 it has performed just as predicted, beating the market by over 80 percentage points and returning over 135%, while hedge funds themselves have collectively underperformed the market (read the details here).
Luxor initiated a position in Northstar Realty Finance Corp (NYSE:NRF) during the fourth quarter of 2013. So far this year, the stock has depreciated by more than 11%, while its losses over the past year amount to nearly 7.6%. In comparison, the retail REIT industry has risen slightly, by 0.42% year-to-date, but has posted strong gains of over 16% over the last 12 months.
Northstar Realty Finance Corp (NYSE:NRF) offers a particularly high dividend yield of 10.23% and the expectations of a hike in interest rates have led to an unreasonable selloff, which has led to the company’s cheap valuation and high dividend yield. Recently, Deutsche Bank reiterated its ‘Buy’ rating for Northstar Realty Finance Corp (NYSE:NRF) and increased its price target to $21, which provides about 38% upside from current trading levels.
Among Northstar Realty Finance Corp (NYSE:NRF)’s latest ventures is the definitive agreement that it signed to acquire one of Frankfurt’s tallest skyscrapers, Trianon office tower, from Madison International Realty LLC and a fund managed by Morgan Stanley for $611 million. The company’s Europe unit, which is in the process of being spunoff, recently priced a $300 million private note offering with a 4.625% interest attached to them, which are due in December 2016.
Among the hedge funds that we track, the interest in the company rose during the first quarter as smart money found the entry point in Northstar Realty Finance Corp (NYSE:NRF) to be enticing. A total of 72 funds had invested $2.47 billion in the company at the end of March as compared with 67 firms with $1.75 billion in shares at the end of the previous quarter. Aside from Luxor, Robert Pitts‘ Steadfast Capital Management and Phil Gross and Robert Atchinson’s Adage Capital Management are the two largest stockholders of Northstar Realty Finance Corp (NYSE:NRF) within our database with holdings of 15.81 million shares valued at $286.54 million and 13.18 million shares valued at $238.83 million respectively. Other prominent investors of the company include Israel Englander’s Millennium Management and Ken Griffin‘s renowned managed futures fund, Citadel Investment Group.
Disclosure: None
