Another fund that recently joined the ranks of investment firms which have disclosed their equity portfolios for the reporting period of March 31 is Nancy Havens-Hasty‘s Havens Advisors. The market value of the fund’s equity portfolio stood at $125.40 million as of the reporting period, down from $161.09 million from the previous one. The consumer discretionary and health care sectors were the largest contributors to the portfolio, constituting 37% and 23% of its value respectively. The fund’s top equity picks at the end of the first quarter were Family Dollar Stores, Inc. (NYSE:FDO), DIRECTV (NASDAQ:DTV), TRW Automotive Holdings Corp. (NYSE:TRW), and Lorillard Inc. (NYSE:LO).
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Havens-Hasty founded Havens Advisors in 1995 and launched her first fund in the following year with $19 million. The ex-Bear Stearns risk arbitrage expert now has about $182 million worth of assets under management. The fund follows an event-driven strategy, whereby it seeks to profit from the completion of proposed mergers, leveraged buyouts, spin-offs and such. Havens keeps a watchful eye over her portfolio and is constantly in touch with the latest market moves, the result of an event earlier on in her career when a merger between Ciena Corporation (NYSE:CIEN), in which Havens-Hasty had a sizable position, and Tellabs fell through just minutes before the shareholder voting. Losses piled up, ultimately amounting to 5% of the firm’s fledgling fund. The incident not only proved to be a vital lesson in risk management, but also instilled an overcautious attitude in Havens-Hasty, who now keeps up with news related to her holdings every second the market is open, and once executed a trade while on a bicycle in Italy.
Havens Advisors’ largest equity holding at the end of the first quarter was Family Dollar Stores, Inc. (NYSE:FDO) with over 168,600 shares valued at $13.18 million. The Family Dollar shareholders gave the greenlight on being acquired by Dollar Tree, Inc. (NASDAQ:DLTR) in January, assuming that it would involve a lower number of divestures of its stores (approximately 300) than a deal with Dollar General Corp. (NYSE:DG). After a scare in February, when it was disclosed that the FTC would be reviewing 500 stores, the affected stores turned out to be 340 in April. Family Dollar Stores, Inc. (NYSE:FDO)’s revenue of $2.8 billion for the second fiscal quarter were in line with the estimates, while its EPS of $0.74 beat estimates by $0.01. Nelson Peltz‘s Trian Partners and Paul Singer‘s Elliott Management are the two largest Family Dollar Stores, Inc. (NYSE:FDO) stockholders from our database.
Next in line is DIRECTV (NASDAQ:DTV) with Havens holding a stake of 137,325 shares valued at $12.46 million. The holding represented 9.93% of the fund’s portfolio value. The fund increased its stake in the $44.52 billion provider of digital television entertainment by 69% over the quarter. DIRECTV (NASDAQ:DTV)’s $48 billion merger with AT&T Inc. (NYSE:T), the second largest wireless carrier in the U.S., is facing opposition from Netflix, Inc. (NASDAQ:NFLX), who recently urged the U.S. Federal Communications Commission to reject the deal. DIRECTV (NASDAQ:DTV) is the country’s largest pay-TV provider and according to Netflix the pending deal will ‘limit competition and innovation in the online video space’. Two other significant stockholders of the company include legendary investor Warren Buffett of Berkshire Hathaway, and Jonathon Jacobson‘s Highfields Capital Management.
Havens Advisors’ third largest holding, Automotive Holdings Corp. (NYSE:TRW) was comprised of nearly 118,200 shares valued at $12.42 million. During the quarter 30,200 shares of the company were acquired. The supplier of automotive systems, modules and components is one step closer to being acquired by the German car parts maker ZF Friedrichshafen, which recently received approval for its $13.5 billion takeover offer from the European Union, provided that it sells Automotive Holdings Corp. (NYSE:TRW)’s chassis components business. The company’s stock has appreciated by about 2.44% year-to-date. In its financial results for the first quarter, Automotive Holdings Corp. (NYSE:TRW)’s EPS of $2.01 beat estimates by $0.14, but its revenue of $4.41 billion was $40 million short of estimates. Mathew Halbower’s Pentwater Capital Management held about 4.85 million shares of Automotive Holdings Corp. (NYSE:TRW) at the end of the fourth quarter.
A stake in Lorillard Inc. (NYSE:LO) was initiated by Havens Advisors during the first quarter with some 124,100 shares valued at $8.67 million. The $25.94 billion tobacco company is another risk arbitrage pick, whose sale to U.S. Reynolds American, Inc. (NYSE:RAI) seems to be on hold for the time being by the FTC’s antitrust concerns, since it involves the marriage of the second and third ranked tobacco companies in the U.S. Reynolds American, Inc. (NYSE:RAI) offered to buy Lorillard Inc. (NYSE:LO) for $25 billion last year. Among other investors hoping for the merger to go through is Daniel S. Och, as his fund OZ Management held about 4.37 million shares of Lorillard Inc. (NYSE:LO), according to its latest filing.
Insider Monkey tracks hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of 6 basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of 7 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). We believe investors will be better off by focusing on small-cap stocks rather than large-cap stocks.
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