After Returning $400 Million to Investors, This is How Seminole Management Tweaked its Portfolio in Q1

Seminole Management Company is a New York-based hedge fund co-founded by Michael Messner and Paul Shiverick in 1995. In December 2015, the investment firm wrote in a letter to investors that it decided to return $400 million of outside investors’ money because it could not “maintain historical-like returns” in a changed trading environment without reducing the amount of capital under management. Seminole Management, known as a value-oriented investment firm, blamed the incursion of high-frequency trading and the increase of passive investing for its recent poor performance, saying that “the game has changed”. Although the firm’s decision to return 10% of its former assets under management back to outside investors does not seem to be a game-changer, the reduced pool of capital may improve the hedge fund’s capital allocation strategy quite noticeably. With that in mind, let’s have a look at Seminole’s top-5 holdings now that it’s had a full quarter under its belt since its capital reduction.

At Insider Monkey, we track around 785 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).

#5. T-Mobile US Inc. (NASDAQ:TMUS)

 – Number of shares held by Seminole Management (as of March 31): 1.61 Million

 – Value of Seminole Management’s holding (as of March 31): $61.81 Million

Seminole Management Company slashed its stake in T-Mobile US Inc. (NASDAQ:TMUS) by roughly 40% during the first three months of the year, ending the first quarter with 1.61 million shares valued at $61.81 million. The reshuffled stake accounted for nearly 5.0% of Seminole’s equity holding at the end of March. The third-largest U.S wireless carrier has seen its shares gain 4% since the beginning of 2016, while its shares currently change hands at around 21.5-times expected earnings, significantly above the forward P/E multiple of 13.4 for the telecommunications services sector. Just recently, T-Mobile announced a deal with Cuban state-owned telecommunications carrier Empresa De Telecomuncaciones De Cuba that will enable T-Mobile customers to keep in touch with family and friends in Cuba at more affordable rates, as well as allow travelling customers to use their mobile phones in Cuba. First Eagle Investment Management LLC, headed by Mehdi Mahmud, acquired a stake of 2.28 million shares of T-Mobile US Inc. (NASDAQ:TMUS) during the March quarter.

On the next two pages of this article we’ll examine Seminole Management’s top-4 stock picks as of March 31.