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Top Bets of Parametrica Management – Barron’s Penta No. 1 Fund

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The world’s premier investing publication Barron’s recently compiled Barron’s Penta annual hedge fund ranking and the top hedge fund vehicle on this year’s list is a big surprise indeed. I would bet my bottom dollar that most stock market participants know close to nothing about Parametrica Management. This Hong Kong-based investment firm topped Barron’s Penta ranking this year, with the Asian asset manager posting a three-year compound annualized return of almost 30% through the end of 2015. Parametrica Management, founded by Xiongwei Ju in 2009, posted an impressive gain of 45% last year, whereas the entire hedge fund industry lost money on aggregate. The founder of the Hong Kong-based investment firm, which specializes in statistical arbitrage, previously served as a managing director and senior portfolio manager at Israel Englander’s Millennium International Management. Leaving this discussion aside, Insider Monkey decided to have a look at Parametrica Management’s top equity positions as of the end of the first quarter of 2016, as well as discuss the performance of those positions to date.

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).

Stocks to Watch (Barron's)

#5. Herman Miller Inc. (NASDAQ:MLHR)

– Shares owned by Parametrica Management as of March 31: 15,151

– Value of Parametrica Management’s holding as of March 31: $468,000

Parametrica Management acquired a new stake of 15,151 shares of Herman Miller Inc. (NASDAQ:MLHR) during the first three months of 2016, which was valued at $468,000 on March 31. The shares of the manufacturer of office furniture and related items have gained 10% since the beginning of 2016. Herman Miller reported net sales of $536.5 million for its third quarter of fiscal 2016 that ended February 27, up 3.9% relative to the same quarter of the prior year. The growth in the company’s top line, accompanied by sustained gross margin expansion and controlled operating expenses, fueled the company’s top line growth. Diluted earnings per share grew to $0.46 from $0.35 reported a year ago. The shares of office furniture maker are currently changing hands at around 13.8-times expected earnings, below the forward PE ratio of 16.5 for the S&P 500 gauge. Royce & Associates, founded by Chuck Royce, was the owner of 1.12 million shares of Herman Miller Inc. (NASDAQ:MLHR) at the end of March.

Follow Miller Herman Inc (NASDAQ:MLHR)
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#4. Western Alliance Bancorporation (NYSE:WAL)

– Shares owned by Parametrica Management as of March 31: 14,749

– Value of Parametrica Management’s holding as of March 31: $492,000

The Hong Kong-based asset manager also added a 14,749-share position in Western Alliance Bancorporation (NYSE:WAL) to its portfolio during the January-to-March period. The new position was worth $492,000 at the end of March and accounted for 1.8% of the firm’s entire portfolio. In late April, the bank holding company announced the completion of its acquisition of a domestic select-service hotel franchise finance loan portfolio from General Electric Company (NYSE:GE)’s GE Capital US Holdings, as part of the seller’s strategy to divest its finance arm. Western Alliance paid $1.28 billion for the loan portfolio that had a yield of 4.8%. The company’s interest income for the first quarter of 2016 increased by 39% year-over-year to $154.3 million, primarily due to a $2.48 billion increase in its average loan balance, as well as an increase in the average yield on loans. Western Alliance shares are 5% in the red year-to-date. John Brennan’s Sirios Capital Management reported ownership of 2.61 million shares of Western Alliance Bancorporation (NYSE:WAL) through the latest round of 13Fs.

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The second page of this article will reveal the top three equity positions in Parametrica Management’s portfolio at the end of the March quarter.

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