Richard Blum’s Latest 13F Shows Strong Focus on Services

Last Friday, Richard Blum’s Blum Capital Partners disclosed its long equity positions as of the end of the fourth quarter of 2013 with the U.S. Securities and Exchange Commission. We have come to realize that the most popular small cap stocks among hedge funds outperformed the market by 18 percentage points even though we started measuring the returns a couple of weeks after 13Fs have been made public. It can also be productive to treat individual 13Fs as free recommendations from fund managers- not necessarily to be followed, but to be considered briefly and then researched further if they seem appealing.

Richard Blum

Therefore, I would like to take a closer look at Blum’s fourth quarter equity portfolio and the modifications that took place over the quarter. This fund has been around for almost 40 years, and its current equity portfolio is worth $640 million. Focused on small- to mid-cap companies in both the public and private markets, it seeks for fundamentally strong companies that are undervalued and usually intends to a seat on the boards of these firms.

Over Q4, the fund did not acquire any new stocks, nor did it increase its stakes in any of its six preexisting holdings. However, it did reduce its position in two of them: SEI Investments Company (NASDAQ:SEIC) and ITT Educational Services, Inc. (NYSE:ESI). Let’s take a look at these transactions:

By the end of the fourth quarter of 2013, Blum declared owning 893,815 shares of SEI Investments Company (NASDAQ:SEIC), worth more than $30.5 million. This means that the fund sold 200,000 shares over the quarter. The sale could be motivated by several issues: a high dependency on capital markets, the decline of private banking (the firm’s most important segment), the broadening of its margins, and some transparency issues. As the stock trades very close to its Q4 prices, upside lost (or downside avoided) hasn’t been much, though.

The other company that saw Blum reduce its stake, ITT Educational Services, Inc. (NYSE:ESI), is a $746 million market cap postsecondary degree programs provider in the U.S. The fund cut its exposure to the firm by 23% during the fourth quarter, and now holds 2.30 million shares, worth approximately $72 million. Despite this strong cutback, the company remains the fund’s second largest holding, trailing CBRE Group Inc (NYSE:CBG), a $9 billion market cap commercial real estate services firm. ITT Educational Services, Inc. (NYSE:ESI) looks good, fundamentally, having retrieved industry leading margins and returns lately. However, its long-term EPS growth projections do not look at all good, which makes the sale understandable.

The fund´s largest position remained unchanged over Q4. Blum still owns more than 15 million shares of CBRE Group Inc (NYSE:CBG), same as in Q3. Its holdings are valued at more than $400 million and should continue to rise.  Just like most analysts, Blum´s fund seems to love this stock, mainly in account of its above-average growth prospects and returns on equity and assets that quadruple its industry’s mean values, global reach, geographical diversification, market position, and strong brand name.

Finally, I would like to briefly mention Blum’s remaining positions, which occupy the third, fourth and fifth spots in its portfolio in terms of market value. These are Avid Technology, Inc. (NASDAQ:AVID), Moneygram International Inc (NASDAQ:MGI), and Career Education Corp. (NASDAQ:CECO), respectively. All of them are small-cap companies, so the fund must be certainly betting on growth, since its fundamentals and valuations do not look very alluring.

Disclosure: Javier Hasse holds no position in any stocks mentioned

Recommended Reading:

Broadfin Capital Initiates Stake in Eleven Biotherapeutics (EBIO) Following Its IPO

Hedge Fund News: Thomas Steyer, David Einhorn & Carl Icahn

5 Stocks Hedge Funds Are Absolutely Crazy About

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!