Value Holdings L.P. is a New York-based hedge fund vehicle founded by Timothy Curro in 1995. The little-known asset manager predominantly seeks to invest in small-cap companies with strong fundamentals and huge piles of cash. Interestingly enough, one of the ways that Mr. Curro finds possible investment candidates is by comparing a company’s current market value to what the company might obtain in a leveraged buyout, assuming the acquirer seeks to repay the debt from the deal with only the free cash flow from the acquired company.
Although there is hardly any information about the performance of Mr. Curro’s Manhattan-based asset manager over the past several years, the relatively unknown firm generated an annual net-of-fees return of 19.5% in the first nine years of its existence, more than double the 8% annual return delivered by the S&P 500 Index over the same period. The fund’s quarterly 13F filing for the April-to-June period shows that Value Holdings L.P. oversees an equity portfolio worth $155.75 million as of June 30. As Industrials is one of the sectors that Value Holdings targets, let’s have a look at five stocks from the sector that are favored by Mr. Curro and his team.
At Insider Monkey, we track around 765 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details).
#5. Emcor Group Inc. (NYSE:EME)
– Shares Owned by Value Holdings L.P. (as of June 30): 157,100
– Value of Value Holdings L.P.’s Holding (as of June 30): $7.74 Million
Value Holdings L.P. did not make any alterations to its 157,100-share position in Emcor Group Inc. (NYSE:EME) during the three-month period ended June 30, with the position being valued at $7.74 million on June 30. The U.S. electrical and mechanical construction and facilities services firm has seen the value of its stock advance by 15% since the beginning of 2016, as the company’s second quarter top- and bottom-line figures set new company records. Emcor Group reported revenue of $1.93 billion for the quarter, up from $1.65 billion posted a year prior, thanks to revenue increasing within all reportable segments, save for the United Kingdom building services segment, which was impacted by the depreciation of the British pound against the greenback. Emcor Group’s Board recently approved a quarterly dividend payment of $0.08 per share, which equates to an annual dividend yield of 0.58%. Royce & Associates, founded by Chuck Royce, was the owner of 1.17 million shares of Emcor Group Inc. (NYSE:EME) at the end of March.
#4. Insperity Inc. (NYSE:NSP)
– Shares Owned by Value Holdings L.P. (as of June 30): 129,959
– Value of Value Holdings L.P.’s Holding (as of June 30): $10.04 Million
The Manhattan-based hedge fund firm trimmed its position in Insperity Inc. (NYSE:NSP) by 10% during the second quarter, to 129,959 shares. The reduced position was worth $10.04 million at the end of the quarter and made up 6.4% of the value of the fund’s portfolio. Insperity, which provides human resources and other services to businesses, has seen its market capitalization increase by 39% since the start of the year. In mid-May, the company reached an agreement with Jeffrey Smith’s Starboard Value to add the activist investor’s nominee to its Board of Directors and begin a search for a new Independent Director. Soon thereafter, Insperity also hiked its quarterly dividend payment by $0.03, to $0.25 per share, as well as authorized an expansion of its stock repurchase program by an additional one million shares to 1.5 million shares. The human resources and business solutions company’s second quarter revenue was $707.33 million, up by 13.7% year-over-year, but meaningfully below the $720.85 million-figure anticipated by analysts. Starboard Value had 3.34 million shares of Insperity Inc. (NYSE:NSP) in its portfolio at the end of the first quarter.
The second page of this article will discuss three other industrials stocks favored by Value Holdings.