Selz Capital LLC is a New York-based hedge fund with an equity portfolio of $362 million as of September 30, and has been managed by Bernard T. Selz since 2003. The fund offers investment advisory services regarding security portfolios of individuals, as well as small businesses. Given that Selz Capital has recently filed its 13F for the third quarter, let’s take a closer look at the fund’s favorite picks heading into the fourth quarter, which include Macquarie Infrastructure Corp (NYSE:MIC), Air Lease Corp (NYSE:AL), Magellan Midstream Partners, L.P. (NYSE:MMP), Kinder Morgan Inc (NYSE:KMI), and Gilead Sciences, Inc. (NASDAQ:GILD).
We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 102% since then and outperformed the S&P 500 ETF (SPY) by around 53 percentage points (see more details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.
#5 Gilead Sciences, Inc. (NASDAQ:GILD)
Shares held (as of September 30): 130,000
Total Value (as of September 30): $12.77 million
Percent of Portfolio (as of September 30): 3.52%
Although Selz Capital trimmed its holding by 50,000 shares during the third quarter, the fund still owns 130,000 shares worth $12.77 million as of the end of September. Gilead Sciences, Inc. (NASDAQ:GILD)’s Sovaldi and Harvoni are some of the best selling drugs on the market, and will provide the company with substantial cash flow to buy back shares or pay higher dividends. Shares trade at a discount valuation of just 8.81 times forward earnings and are up 8.67% year-to-date. Analysts have a consensus price target of $124.63 per share, giving the stock 22.59% upside. Among the funds we track, D. E. Shaw held 4.39 million shares at the end of June.
#4 Kinder Morgan Inc (NYSE:KMI)
Shares held (as of September 30): 808,211
Total Value (as of September 30): $22.37 million
Percent of Portfolio (as of September 30): 6.17%
Kinder Morgan Inc (NYSE:KMI)’s stock is down 21.79% year-to-date because of low crude prices. Investors fear the low prices will cause less oil to flow through Kinder Morgan’s pipes, thus lowering the company’s revenue and cash flow. This fear has so far been unwarranted, however, as Kinder Morgan’s fundamentals have remained strong. The company is still growing and estimates that its already attractive dividend yield of 6.14% could grow by an annual 10% for another five years. Saudi Arabia might be succeeding in stifling smaller E&Ps, but it can’t stifle Kinder Morgan. In the previous round of 13F filings, Bob Peck And Andy Raab‘s FPR Partners reported ownership of 4.91 million shares of Kinder Morgan.