Cove Street Capital, founded and managed by Jeffrey Bronchick, is a hedge fund that defines itself as a classic value investor, in the tradition of Ben Graham and Warren Buffett. Over the last reported quarter, Cove Street purchased 6 new stocks, increased its stakes in 29 of its preexisting positions, and sold out of 11. Let’s thus take a look at this fund’s top picks for the last reported quarter in order to elucidate if any of them could stand as interesting investment options.
Mr. Bronchick’s fund’s largest long position is placed at Taminco Corp (NYSE:TAM), a $1.5 billion market cap pure play producer of alkylamines and alkylamine derivatives. Over the last reported quarter (Q1 2014), Cove Street upped its exposure to the company by 3%, and now owns 1.299 million shares, worth more than $27 million. The position in Taminco Corp (NYSE:TAM) accounts for more than 5% of the fund’s total portfolio.
In addition to Mr. Bronchick, other hedge fund managers seem to like Taminco Corp (NYSE:TAM). Robert Joseph Caruso (Select Equity Group) also increased its bets slightly over Q1, and now holds 4.2 million shares, while Doug Silverman and Alexander Klabin (Senator Investment Group) last declared owning 3 million shares.
Approach Resources Inc. (NASDAQ:AREX) is second on this list. This $861 million market cap independent energy company (engaged in the exploration, development, production and acquisition of unconventional natural gas and oil properties in Midland Basin of the greater Permian Basin in West Texas) saw Cove Street boost its exposure by 9% over Q1. The fund now owns 1.267 million shares of Approach Resources Inc. (NASDAQ:AREX), worth around $26 million, according to the latest 13F filing.
This position makes Cove Street the largest hedge fund shareholder – amongst those we track – of Approach Resources Inc. (NASDAQ:AREX). Other prominent hedge funds betting on Approach Resources Inc. (NASDAQ:AREX) are Israel Englander’s Millennium Management, with 238,856 shares, and Ken Griffin’s Citadel Investment Group, with 168,808 shares.
Finally, there’s Chimera Investment Corporation (NYSE:CIM), a $3.25 billion market cap specialty finance company. The firm witnessed the largest increase in Cove Street’s position, amongst the companies listed here. After boosting its stake in Chimera Investment Corporation (NYSE:CIM) by 26%, the fund owns 8.65 million shares of the company, also valued at approximately $26 million by the end of Q1.
On top of Mr. Bronchick’s, other funds have shown themselves bullish about this company. For instance, Leon Cooperman’s Omega Advisors last increased its exposure to Chimera Investment Corporation (NYSE:CIM) by 7%, and now owns more than 66 million shares, and Joshua Friedman and Mitchell Julis’ Canyon Capital Advisors more than tripled its stake, and last declared owning 11.4 million shares.
Cove Street Capital seeks superior long-term performance through the purchase of securities selling at prices materially below its estimate of intrinsic value. Its equity portfolio, valued at more than half a billion dollars, is quite diversified but has a relative focus on financial stocks (35% of the total portfolio), services stocks (19%), and basic materials stocks (11.5%).
Disclosure: Javier Hasse holds no position in any stocks mentioned