Top Five New Positions in Locust Wood’s Equity Portfolio

Stephen J. Ericco established Locust Wood Capital Advisers in 2002 after a long, successful career on Wall Street, which involved positions at Lehman Brothers, Paine Webber and Morgan Stanley. As of January-end the fund holds about $977 million worth of assets under its management. Deducing from the firm’s latest 13F filing, the portfolio turnover ratio stood at 35% for the first quarter as the fund initiated 27 new positions during the quarter. In this regard, we decided to take a look at the top new additions in Locust Wood’s equity portfolio.

We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see more details here).

#5 Northstar Realty Finance Corp (NYSE:NRF)

– Shares Owned by Locust Wood Capital (as of March 31): 641,700

– Value of Holding (as of March 31): $8.42 Million

The newly initiated stake amassed 0.89% of Locust Wood’s portfolio. So far this year the stock price of the $2.35 billion commercial REIT has fallen by almost 23%. Northstar Realty Finance Corp (NYSE:NRF) offers a hefty 12% dividend yield, but investors have been shying away from holding the stock as memories from last year’s crash of the stock are still fresh. In late February the company hired a division of UBS Group to analyze if a recombination with NorthStar Asset Management Group Inc. would be a feasible option. The spinoff between the two took place in 2014. Ray Carroll‘s Breton Hill Capital also initiated a stake in Northstar Realty Finance Corp (NYSE:NRF) during the first quarter with 11,600 shares valued at $152,000.

#4 Charter Communications, Inc. (NASDAQ:CHTR)

– Shares Owned by Locust Wood Capital (as of March 31): 42,300

– Value of Holding (as of March 31): $8.57 Million

Shares of the $24.5 billion cable company have rallied by nearly 11% year-to-date. Charter Communications, Inc. (NASDAQ:CHTR) has recently been given the conditional approval by Federal Communications Commission (FCC) to acquire Time Warner Cable in a $55 billion stock-and-cash deal, and Bright House Networks, which was valued at $10.4 billion. However, the financing costs related to the pending merger led the company to post wider-than-expected losses for the January-March quarter. More precisely, the company posted a loss of $1.68 per share, versus estimates of a loss of $1.35, although the revenue of $2.53 billion was significantly above the expected figure of $1.66 billion. With ownership of 10.33 million shares of Charter Communications, Inc. (NASDAQ:CHTR), legendary investor Warren Buffett‘s Berkshire Hathaway is the largest stockholder of the company among the funds in our database.

#3 General Dynamics Corporation (NYSE:GD)

– Shares Owned by Locust Wood Capital (as of March 31): 144,500

– Value of Holding (as of March 31): $18.99 Million

Moving on, Locust Wood’s newly-initiated stake in General Dynamics Corporation (NYSE:GD) amassed 2.02% of the fund’s portfolio value. Even though the stock price of the Falls Church-based aerospace and defense company is up by nearly 6% year-to-date, Ken Fisher‘s Fisher Asset Management trimmed its General Dynamics holding by 6% to about 13,300 shares during the first quarter. Although General Dynamics Corporation (NYSE:GD)’s first quarter revenue of $7.7 billion saw a 1% decline on year over year basis, EPS jumped by 9% to $2.34, owing to a 2% growth in operating profits and a healthy share buyback program. .

#2 Microsoft Corporation (NASDAQ:MSFT)

– Shares Owned by Locust Wood Capital (as of March 31): 437,500

– Value of Holding (as of March 31): $24.16 Million

Considering that shares of the $384 billion software giant are down by 7% since the start of the year, Locust Wood’s bet on Microsoft Corporation (NASDAQ:MSFT) hasn’t exactly worked out so far. The driving force behind this drop has been the company’s financial report for the third fiscal quarter ending, in which it missed profit expectations as worst quarterly PC numbers since 2007, foreign exchange headwinds and a non-GAAP tax rate of 24% as opposed to the company’s guidance of 20% weighed down on its profitability. Boykin Curry’s Eagle Capital Management reported ownership of 30.80 million shares of Microsoft Corporation in its 13F filing for the March quarter.

#1 Praxair, Inc. (NYSE:PX)

– Shares Owned by Locust Wood Capital (as of March 31): 289,700

– Value of Holding (as of March 31): $33.15 Million

Lastly, based on the 10% surge in Praxair, Inc. (NYSE:PX)’s stock price, Locust seems to have made the right call betting on the company. The $33 billion industrial gas supplier beat both the top and bottom line estimates in its first quarter financial results against the backdrop of a tough macro environment marked by volume declines in North America in the energy, metals and manufacturing industries. In order to combat these headwinds Praxair set out to increase sales to healthcare and food & beverage markets globally. During the January-March period the company also managed to complete six packaged gas acquisition with approximate annualized sales of $50 million. First Eagle Investment Management held 1.71 million shares of Praxair, Inc. (NYSE:PX) at the end of March.

Disclosure: None