Billionaire Richard Perry’s 11 long stock picks for his fund Perry Capital returned 1.8% beating the S&P 500 ETF (SPY) by a full percentage point. Perry is a Goldman Alum having worked in the Risk Arbitrage department decades back. He also worked as an adjunct professor at NYU’s Stern Business School where he got his MBA. In 1998 he co-founded Perry Capital.
Why is tracking Perry’s fund important? Tracking the activity of hedge funds such as Perry Capital is vital for small investors who try to seek out new promising investment opportunities. However, simply imitating the moves made by billionaires and hedge funds firms does not guarantee great returns because most of their top picks are in large-cap stocks. These equities usually don’t beat the market by a large margin, as they are usually more efficiently priced. Hence, here at Insider Monkey, we concentrate our efforts on gathering and analyzing information regarding the small-cap picks of more than 700 hedge funds.
Our research has shown that the most popular small-cap stocks among hedge funds beat the market by 95 basis points per month between 1999 and 2012. There aren’t a lot of investment strategies that can beat the market by 10 percentage points a year so we started tracking the performance of hedge fund’s most popular small cap picks since the end of August 2012. These stocks returned more than 137% since then through the end of March 2015 and dominated S&P 500 ETF (SPY)’s 54% gain by more than 82 percentage points (read the details here).
Now on to the picks.
The largest holding in Richard Perry’s Perry Capital is American International Group Inc (NYSE:AIG). In the last quarter of 2014, Perry actually increased the position in American International Group Inc (NYSE:AIG) by 4% from the level of the previous filing to a total of 10.3 million shares at an allocation of $578 million. This represents a 24% position in the 13F portfolio. Perry is the third largest holder among the funds we track. American International Group Inc (NYSE:AIG) finished the quarter down 1.9% and was a tough stock to hold for other funds as well. Yesterday we mentioned Bruce Berkowitz’s fund also having a rough first quarter with the stock.
Ally Financial Inc (NYSE:ALLY) was Perry Capital’s second largest holding with the firm disclosing at year-end 21 million shares listed at $496 million. Perry’s conviction on Ally Financial Inc (NYSE:ALLY) appears to have grown in the last quarter of 2014 as he purchased 46% more shares. The total position in Ally Financial Inc (NYSE:ALLY) now represents 20.76% of the firm’s overall equity portfolio. Perry Capital’s the third largest holder in the financial services company behind Stephen Feinberg’s Cerberus Capital Management and Dan Loeb’s Third Point. Ally shares edged up 0.4% for the first quarter of 2015.
Nokia Corporation (ADR) (NYSE:NOK) was a laggard in Perry Capital’s portfolio. As of the last filing, the firm disclosed another large bet that the communications giant would turn things around. Perry Capital held at year-end 25.5 million shares of Nokia at an investment allocation of a little over $200 million. Perry’s bullishness grew in the fourth quarter as he increased the stock by 51% from the previous filing. Shares of Nokia Corporation fell 3.5% for the quarter. Perry Capital again is the third largest holder among the funds we track. Other notable names include Rob Citrone’s Discovery Capital Management and Jeffrey Tannenbaum’s Fir Tree.
Perry had a nice pick in KapStone Paper and Packaging Corp. (NYSE:KS). In the last quarter of 2014, Perry decided to adjust the firm’s position by 2%. By the beginning of the year, the firm still held 3.8 million shares of KapStone Paper and Packaging Corp. (NYSE:KS) at a value of $112 million. Perry’s firm is the largest holder of KapStone Paper and Packaging Corp. (NYSE:KS) among the funds we track followed by D.E Shaw, Gilchrist Berg’s Water Street Capital, and David Einhorn’s Greenlight Capital. KapStone Paper and Packaging Corp. (NYSE:KS) was a solid gainer for the first quarter of 2015 with the stock price appreciating 12.3%. Perry has been involved in this name for quite some time and the stock has proven to be a nice investment by gaining over 17% in the last 12 months.
Rock-Tenn Company (NYSE:RKT) was another solid gainer for Perry Capital. As of year-end the firm held 2.8 million shares for an investment allocation of $171.5 million. Perry began trimming the Rock-Tenn Company (NYSE:RKT) position in the fourth quarter of 2014 by 22% and by 2015 the firm held 2.8 million shares at an investment allocation of $171.5 million. Perry Capital is still the second largest holder among the funds we track behind D E Shaw’s 3.6 million share, $221.8 million investment.The stock appreciated nicely in the first quarter by 12.3%.