Activist investor Glenn W. Welling‘s Engaged Capital LLC recently submitted its 13F filing with the U.S. Securities and Exchange Commission for the quarterly period ended March 31, 2015. The filing details that the firm had a public equity portfolio valued at $133.95 million as of the reporting period. The firm has its assets spread among several different industries, including services, technology, industrial goods, and consumer goods, while mainly focusing on long-term perspective investments that range between 2-5 year periods. Engaged Capital was founded by Mr. Welling in 2012, who serves as the fund’s chief investment officer. Welling previously oversaw the management of assets running into the billions of dollars, having served at Relational Investors as Principal and Managing Director and at Credit Suisse as Managing Director. Engaged Capital introduced several news stocks into its portfolio’s fold during the first quarter and we’ll look at the top ones in this article, which are Web.com Group Inc (NASDAQ:WWWW), Benchmark Electronics, Inc. (NYSE:BHE), and Boulder Brands Inc (NASDAQ:BDBD).
Following activist funds like Engaged Capital is important because it is a very specific and focused strategy in which the investor doesn’t have to wait for catalysts to realize gains in the holding. A fund like Engaged can simply create its own catalysts by pushing for them through negotiations with the company’s management and directors. In recent years, the average returns of activists’ hedge funds has been much higher than the returns of an average hedge fund. Furthermore, we believe do-it-yourself investors have an advantage over activist hedge fund investors because they don’t have to pay 2% of their assets and 20% of their gains every year to compensate hedge fund managers. We have found through extensive research that the top small-cap picks of hedge funds are also capable of generating high returns and built a system around this premise. In the 32 months since our small-cap strategy was launched it has returned over 144% and beaten the S&P 500 ETF (SPY) by more than 84 percentage points (read more details). Soon, we’ll be releasing a new quarterly newsletter written by former activist hedge fund analyst Michael Bland that tracks ten or so activist campaigns at any given time.
Engaged Capital LLC held a total of 305,317 shares of Web.com Group Inc (NASDAQ:WWWW) valued at $5.79 million, which represented the top new holding for the fund. The company recently reported its financial results for the first quarter, posting $0.56 in earnings per share, which was $0.03 above analysts’ estimates. On a year-over-year basis however, the company’s revenue for the first quarter slumped by 2.5%. For fiscal year 2015, Web.com Group Inc (NASDAQ:WWWW) is expected to post $2.38 in earnings per share. The company offers an array of internet services with a focus on small businesses. Its services include domains, search engine optimization, hosting, and social media, among others. 13 brokerages have recently commented on the stock, giving it an average rating of “Hold”. Web.com Group Inc (NASDAQ:WWWW) has an average 12-month price target of $23.23, according to analysts that have commented on the stock within the past year, which indicates limited upside based on the current price of shares. Besides Engaged Capital, there were 19 other hedge funds invested in the stock among the funds we track. Some of these include Ahmet Okumus‘ Okumus Fund Management which held a total of 7.78 million shares and recently struck a deal with the company to have two independent directors added to its board, as well as Craig C. Albert’s Sheffield Asset Management, which lowered its ownership slightly during the first quarter, to 3.00 million shares.
As of March 31 Welling’s fund held a total of 232,699 shares of Benchmark Electronics, Inc. (NYSE:BHE) valued at $5.59 million. That acquisition put the firm among the company’s top shareholders. The company recently released its performance results for the first quarter, posting $0.34 in earnings per share, which was $0.02 above analysts’ consensus estimate of $0.32. However, Benchmark Electronics, Inc. (NYSE:BHE) reported total revenue of $620.90 million, falling short of analysts’ estimates of $633.75. After downgrading the stock to a “Sell” rating from a “Hold” on May 1st, analysts at Zacks’ have upgraded the stock back to a “Hold” in a note released on May 26th. On the other side, analysts at Citigroup Inc. gave the company a “Sell” rating, though they raised its price target to $24.00 from $21.00. Benchmark Electronics, Inc. (NYSE:BHE) provides integrated electronics manufacturing services to Original Equipment Manufacturers (OEMs) drawn from diverse industries. Other notable funds with positions in the company include Royce & Associates and Clint Carlson’s Carlson Capital, which increased its stake in the company by 15% to 720,995 shares during the first quarter.
The third and final company among Engaged Capital’s top new picks is Boulder Brands Inc (NASDAQ:BDBD), in which the firm now holds a total of 410,686 shares with a market value of $3.91 million. For the first quarter, the gluten-free and health and wellness products supplier posted $0.05 in earnings per share, which checked with analysts’ estimates. The company’s management also issued an update on the stock’s guidance for fiscal year 2015, estimating earnings per share guidance of $0.25-$0.29. A total of 15 hedge funds were invested in Boulder Brands Inc (NASDAQ:BDBD) on March 31, compared to 13 at the end of 2014. A couple of these are Alyeska Investment Group and Phill Gross and Robert Atchinson‘s Adage Capital Management, with Alyeska having increased its stake in Boulder Brands by over 281% during the first quarter, showing the fund’s increased confidence in the stock.