ValueWorks LLC is a New York-based, value-focused long/short equity hedge fund founded in 2001 by Charles Lemonides, a CFA who previously served as the Chief Investment Officer of Sterling Advisors, an investment advisory unit of Gruntal & Co. ValueWorks LLC currently manages regulatory assets worth around $150 million, with most of that invested in U.S equities. According to the fund’s 13F filing for the September 30 reporting period, its U.S public equity portfolio was worth nearly $112.5 million at the end of September and comprised stocks from almost every sector.
The filing also revealed that during the third quarter the fund’s equity portfolio had a turnover of only 17.24% and that at the end of that period the top-10 equity holdings of the fund accounted for nearly 55% of its portfolio’s value. An interesting detail that emerged from the filing was that ValueWorks lowered its stake marginally in all of its top-9 equity holdings during the September quarter. In this article, we will take a look at the fund’s top pick from each of five prominent sectors as of the beginning of the final quarter of 2016.
At Insider Monkey, we track around 750 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 about our small-cap strategy).
Healthcare: Gilead Sciences, Inc. (NASDAQ:GILD)
– Shares Owned by ValueWorks LLC (as of September 30): 72,811
– Value of the Holding (as of September 30): $5.76 Million
Let’s start with ValueWorks’ top healthcare pick, Gilead Sciences, Inc. (NASDAQ:GILD), in which the fund reduced its stake by a paltry 1% in the third quarter. Shares of the research-based biopharmaceutical company have been on a consistent downtrend since the second-half of 2015 and have lost over one-fourth of their value thus far in 2016. According to technical analysts, after the recent victory of President-elect Donald Trump, Gilead Sciences, Inc. (NASDAQ:GILD)’s stock has broken through its downward channel and could see upside in the short-term. The recent fundamental developments also suggest the same, as just a few days ago the FDA and European Commission approved the company’s drug Vemildy (Tenofovir alafenamide, TAF), which is a once-daily treatment for adults with chronic hepatitis B virus infection with compensated liver disease. On Monday, analysts at Stifel Nicolaus initiated coverage on Gilead with a ‘Buy’ rating and $100 price target, suggesting potential upside of 31.5%.
-Related Reading: 4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays
Industrials: Boeing Co (NYSE:BA)
– Shares Owned by ValueWorks LLC (as of September 30): 45,581
– Value of the Holding (as of September 30): $6 Million
Boeing Co (NYSE:BA) is one of the oldest equity holdings of ValueWorks, with the fund having initiated its stake in it during the third quarter of 2009. Although the stock has appreciated by over 250% since then, it has really gone nowhere since the last quarter of 2013. Nevertheless, because the company has more than doubled its quarterly dividend in the meantime, its forward yield has gone up significantly, currently standing very close to 3%. Most analysts who cover the stock think that it will continue to move sideways for a long time, as it is currently trading at a trailing P/E of 22.44, which is significantly higher than its average trailing P/E for the past five years of 18.03. For its most recent quarter, Boeing Co (NYSE:BA) reported better-than-expected earnings and revenue, which nonetheless didn’t impress analysts at Goldman Sachs, who on October 27 reiterated their ‘Sell’ rating and $109 price target on the stock.
We’ll check out three more of the fund’s stock picks on the next page.