Richard S. Meisenberg‘s ACK Asset Management recently filed its 13F with the SEC for the reporting period of June 30. ACK Asset Management is a long/short equity hedge fund that primarily invests in small- and mid-cap companies. Prior to founding ACK in 2005, Mr. Meisenberg was the founding partner of Palisade Capital Management from 1996 until 2003. Mr. Meisenberg founded ACK with John H. Reilly III, who serves as a managing partner and co-portfolio manager at the fund. According to ACK’s 13F filing, the fund’s U.S-traded public equity portfolio was worth around $357.75 million at the end of June, with 39% and 23% of it invested in stocks from the industrials and consumer discretionary sectors respectively. The fund sold out of its stakes in 14 stocks during the second quarter, while initiating a stake in 11 stocks. In this article we are going to focus on ACK’s top industrial picks heading into the third quarter: Dycom Industries, Inc. (NYSE:DY), US Concrete Inc (NASDAQ:USCR), and Clean Harbors Inc (NYSE:CLH).
Why do we pay attention to hedge fund sentiment? Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research have shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks managed to return more than 123% over the last 35 months and outperformed the S&P 500 Index by 65 percentage points (see the details here).
Even though ACK sold 40,200 shares of Dycom Industries, Inc. (NYSE:DY) during the second quarter, the company still ended up as ACK’s largest holding at the end of the quarter, owing to the 20.5% rise in its stock price during that period. As of June 30, ACK Asset Management owned 577,300 shares of Dycom Industries, Inc. (NYSE:DY) worth $33.97 million. The company is scheduled to report its fiscal 2015 fourth quarter results on August 24, for the period ending July 31. Analysts expect the company to report EPS of $0.83 for the quarter, significantly above the $0.50 EPS it reported for the same quarter last year. On July 10, analysts at FBR & Co reiterated their ‘Outperform’ rating on the stock while upping their price target to $78 from $70, which represents a potential 15% upside to the stock’s current trading price. On July 1, analysts at Wells Fargo & Co. reiterated their ‘Buy’ rating on the stock. ACK Asset Management was not the only one reducing its holding in Dycom Industries, Inc. (NYSE:DY) during the second quarter, as Michael O’Keefe‘s 12th Street Asset Management also reduced its stake in the company by 21% to 510,286 shares.