Keane Capital Management is a Charlotte, North Carolina based hedge fund founded in 1999 by Peter Keane. When Wachovia Corp announced it intended to take over Interstate/Johnson Lane Inc., a brokerage firm where he was a partner and lead portfolio manager, Keane decided to buy his fund from the new owners and went out on his own. In its first 6 months, Keen Vision Fund registered a return of 23% and next year it posted a net return of 46.8%. Keane went on to launch another two funds, which have enjoyed great success, posting double-digit average annual returns. He invests mainly in small companies with a market cap smaller than 2 billion and which are not among Wall Street’s favorites. Although the funds are long/short ones, Keane mostly focuses on long positions and rarely buys more than 5% of the common stock of a company. According to Keane, a firm is successful if “50% of its ideas work and 30% work significantly”.
During the fourth quarter of 2013, Keane has made some notable changes to his funds’ portfolios. He has increased Keane Capital’s stakes in companies like Imperial Holdings, Inc. (NYSE:IFT) and M.D.C. Holdings, Inc. (NYSE:MDC), but has also reduced some positions, one of them being Himax Technologies, Inc. (ADR) (NASDAQ:HIMX). His top 5 picks, which includes other financial, technology and transportation companies, has not suffered any changes. Let’s take a deeper look into some of the stocks in Keane’s equity portfolio.
First up is Himax Technologies, Inc. (ADR) (NASDAQ:HIMX), a producer of semiconductors for flat panel displays. During the previous quarter, Keane slightly decreased his investment by selling around 1,900 shares. As a result, Keane Capital currently holds more than 216,800 shares worth approximately $3.19 million. Julian Robertson, the legendary hedge fund manager, has, on the other hand, added Himax Technologies to his portfolio during the same period. Tiger Management has reported 1.96 million shares in its latest 13F filing. Himax posted revenues of $195 million and earnings per share (EPS) of $0.1 for the previous quarter. Analysts expect it to register the same performance in the current quarter. The company has a market cap of $2.65 billion and pays an annual dividend of $0.25, which represents a yield of 1.80%. The stock is trading at a trailing Price to Earnings (P/E) ratio of 42.46, significantly lower than the industry average of 224.70.
Next up is Lionbridge Technologies, Inc. (NASDAQ:LIOX). Keane has reduced his funds’ position by 8% to 532,800 shares, reportedly, worth $3.17 million. Jim Simons, the hedge fund guru, is actually optimistic about this stock and during the previous quarter, his fund, Renaissance Technologies, has increased its holding by 54% to 530,320 shares. Lionbridge is a provider of language, content and testing solutions that has a worldwide presence. The company has a market cap of $454 million and does not pay a dividend. So far this year the stock has advanced 21% to a current price of $7.15 per share and trades at a trailing P/E ratio of 37.53. For the three months ended December 31, 2013, Lionbridge posted revenues of $127 million and EPS of $0.18. This quarter, it is expected to register $122 million in revenues and $0.05 in earnings.
Keane is optimistic about the prospects of Imperial Holdings, Inc. (NYSE:IFT), having increased his funds’ investment in this stock by 31% to 475,900 shares, valued at $3.11 million. A provider of financial services that operates mainly in United States, Imperial Holdings has a market cap of $117 million and does not pay a dividend. The stock is traded at a trailing P/E ratio of 2.57, well below the industry average of 21.40. The company is set to announce 2013 fourth quarter financial results today, March 10, after the market close. For the same period in 2012, Imperial Holdings posted revenues of $7 million and a loss per share of $0.36.
Another stock that Keane is betting big on is M.D.C. Holdings, Inc. (NYSE:MDC), a company that engages in home building and provision of financial services. During the fourth quarter of 2013, Keane upped his stake by 72%, taking it to 95,000 shares valued at a little over $3 million. M.D.C. Holdings has a market cap of $1.43 billion and pays an annual dividend of $0.25, which represents a yield of 0.9%. The stock is traded at a P/E ratio of 4.65, lower than the industry average of 10.60. The company posted revenues of $462 million and earnings of $0.64 for the previous quarter and is expected to register $340 million in earnings and EPS of $0.23 for the first three months of 2014.
Last but not least is Air Transport Services Group Inc. (NASDAQ:ATSG), a provider of aircraft leasing and maintenance mainly for cargo transportation. During the previous quarter, Keane Capital reduced its holding of this stock by 17% and now owns 377,010 shares valued at approximately $3 million. For the fourth quarter of 2013, Air Transport Services Group posted revenues of $157, a 2% year-over-year increase, and earnings of $0.15 per diluted share. 2014 first quarter is expected to bring revenues of $149 million and EPS of $0.10. The company has a market cap of $481 million and does not pay a dividend. The stock trades at a trailing P/E ratio of 13.59 and has a beta of 4.45, which makes it a very volatile one.