Who’s Been the Best Performing Fund of the Third Quarter?

FORTRESS INVESTMENT GROUPFortress Investment Group is the top-performing fund of the third quarter of the over 400 funds and investors we track, seeing a return of almost 44% during 3Q. We have calculated the value-weighted returns for 400 hedge funds in the 1500 largest stocks and complied a list of the top performing funds for the first three quarters of 2012. The returns are based on the fund’s 13F long positions only, as we do not have access to their short positions.

Fortress started out as a private-equity firm in 1998, being founded by former BlackRock Financial partner—Wesley Edens, UBS managing director—Robert Kauffman, and another UBS managing director—Randal Nardone. The former private equity focused investment firm entered the hedge fund industry in 2010 by bringing in former Goldman Sachs partners Michael Novogratz and Pete Briger to launch the Fortress hedge funds.

Fortress’ top investment according its 2Q 13F was Nationstar Mortgage Holdings Inc (NYSE:NSM). Nationstar is the non-bank residential mortgage servicer that offers a range of services across residential mortgages. Nationstar is the pride and joy of Fortress, who had over 45% of its 2Q 13F portfolio invested in the company. Nationstar was up almost 55% for 3Q and Fortress owned 67.5 million shares at the end of June. Assuming Fortress owned the same number of shares throughout 3Q, Fortress made over $783 million on this holding alone. Nationstar has been soaring as housing begins to see a turnaround.

Nationstar was recently announced as the winning bidder for the bankrupt Residential Capital, a former unit of Ally Financial. Credit Suisse recently placed an upside price target of $36 if Nationstar won the bid for Residential and a $24 price target if it did not. No other fund manager owned near the number of shares as Fortress at the end of 2Q, yet a few other top funds did manage to benefit from Nationstar’s 3Q success, including John Osterweis and Israel Englander, with 2 million and 1 million shares, respectively.

Rounding out Fortress’ top five picks of its 2Q 13F are RailAmerica, Inc. (NYSE:RA), Brookdale Senior Living, Inc. (NYSE:BKD), America Capital Ltd. (NASDAQ:ACAS), and Seacube Container Leasing Ltd (NYSE:BOX). Fortress owned more shares than any other fund in each of its top five 2Q holdings and has concentrated portfolio with nearly 80% of the firm’s 13F invested in these five holdings.

RailAmerica was up over 15% for the third quarter based on a buyout of the company for $27.50 per share by Genesee & Wyoming. The short line and regional freight rail operator continues to post solid shipment numbers as the deal is being closed. September carloads were up 2.4% from the same month a year ago, on the back of a 2.9% increase in August and 5.4% in July. Again, Fortress had a heavy concentration in RailAmerica, over 23% of its 2Q 13F, allowing the company to make serious money on the RailAmerica’s buyout.

Brookdale, up 30% during the third quarter, is an operator of senior living communities throughout the United States. The company has seen interest from other fund managers, Carlson Capital and JAT Capital as investors gear up for an aging population boom. This overwhelming certainty that our population will get older and indeed need some degree of assisted living has continued to boost the company’s stock price despite missing EPS estimates for the last four quarters. Deutsche Bank recently assumed coverage of the company, placing a $33 price target on the company, versus its current stock price of $23.50.

American Capital is an equity firm and global asset manager. Up almost 13% in the third quarter, Fortress was not the only fund to enjoy the upside, where Luxor Capital also had a massive stake. After a rough 2008, the company suspended its dividend in 2009. However, the company has crushed earnings for the last three quarters and trades at a P/B of 0.9, compared to peers Ares Capital and KKR, 3.0 and 2.6, respectively.

SeaCube is a container leasing company, engaged in the acquisition, leasing and sale of refrigerated and dry containers and generator sets. While SeaCube was up only 10% during 3Q, the company pays a 6.3% dividend yield, with only a 47% payout ratio. Fortress was the only major fund that showed major interest in SeaCube for 2Q, although Chuck Royce, Israel Englander and D.E. Shaw all held modest positions. The company is a micro-cap stock with a sub $500 million market cap, but operates internationally as one of the largest container leasing companies. Despite weakness in both Europe and Asia for other industrial companies, SeaCube has seen increases in these segments on shipment volume and is expected to grow full year EPS by over 20%.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Biggest Airports in the World

The 5 Most Gang Infested Cities In America

The 34 Smartest Countries in the World

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!