Anthony Scaramucci’s SkyBridge Has Found Portfolio Sweet Spot; Buffs Every Position by 10%

Anthony Scaramucci is perhaps one of the most well known hedge fund managers on the Street today. Having started his career at Goldman Sachs and worked his way to the top of the investment management industry, Mr. Scaramucci over the last few years has devoted a considerable amount of time to educate investors through his books, TV show and the annual SkyBridge Alternatives “SALT” Conference. Last month, he published his third book ‘Hopping over the Rabbit Hole: How Entrepreneurs Turn Failure into Success’, which has been received well by readers. Despite juggling through so many commitments, Mr. Scaramucci hasn’t lost his focus from managing his $10 billion fund of funds, Skybridge Capital.

The recent 13F filing by Skybridge Capital suggests that the fund became increasingly bullish on its stock picks last quarter. During the July-September period, the fund increased its stake in all of the 30 long positions that it held by 10%. However, it also didn’t initiate any new stake during that period. In this post, we are going to take a look at Skybridge’s top five stock picks at the end of third quarter and will try to analyze why the fund is betting big on these stocks.

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At Insider Monkey, we track around 750 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).

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#5 Caterpillar Inc. (NYSE:CAT)

– Shares Owned by Skybridge Capital (as of September 30): 187,650

– Value of the Holding (as of September 30): $16.65 million

Let’s start with Skybridge Capital’s fifth largest holding, Caterpillar Inc. (NYSE:CAT). After suffering a severe fall last year, shares of the construction and mining equipment manufacturer have performed rally well this year, rising by 23.22% year-to-date. Since the company hasn’t hiked its dividend from the second-half of last year the appreciation in its stock price has taken a toll on its annual dividend yield, which currently stands at 3.68%.  For its most recent quarter the company reported weaker than expected results due to continuing slowdown in its end markets. In the last four years, Caterpillar Inc. (NYSE:CAT)’s revenues have declined consecutively, which has led some analysts to conclude that the rally in its stock isn’t sustainable and will end fairly soon.

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#4 Garmin Ltd. (NASDAQ:GRMN)

– Shares Owned by Skybridge Capital (as of September 30): 352,052

– Value of the Holding (as of September 30): $16.94 million

Skybridge Capital initiated a stake in Garmin Ltd. (NASDAQ:GRMN) during the fourth quarter of 2015 and has been increasing its holding in the company in every quarter since then. The stock of Garmin Ltd. (NASDAQ:GRMN) has also kept moving up since Skybridge Capital first initiated a stake in the company and currently trades up by 28.8% year-to-date. Despite this rally, the stock still sports an attractive forward dividend yield of 4.28%. For its third quarter, the company reported significantly better than expected results largely on the back of improvement in non-auto sales. Though several analysts who track the stock have a neutral view on it currently, a number of analysts consider Garmin a safe play due to its strong cash reserves, zero debt and large share repurchase program.

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#3 Best Buy Co Inc (NYSE:BBY)

– Shares Owned by Skybridge Capital (as of September 30): 463,361

– Value of the Holding (as of September 30): $17.7 million

Moving on, Best Buy Co Inc (NYSE:BBY) was a new entrant in Skybridge Capital’s equity portfolio during the second quarter. Since then, the stock of the tech retailer has appreciated by over 30% and are currently trading up 28.31% year-to-date. For its second fiscal quarter, Best Buy Co Inc (NYSE:BBY) reported stellar financial numbers and analysts are expecting a similar performance when it declares its third-quarter results on November 17. The current consensus estimate includes EPS of $0.47 on revenue of $8.85 billion. For the same quarter of the previous year, Best Buy reported EPS of $0.41 on revenue of $8.82 billion. On November 8, analysts at Evercore ISI downgraded the stock to ‘Sell’ from ‘Hold’.

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#2 Western Digital Corp (NASDAQ:WDC)

– Shares Owned by Skybridge Capital (as of September 30): 307,940

– Value of the Holding (as of September 30): $18 million

Western Digital Corp (NASDAQ:WDC) is another stock that has performed well since Skybridge Capital initiated a stake in it during the second quarter. Although the stock is currently trading down by 3.19% year-to-date, it has appreciated 22% since the end of June. On November 4, Western Digital Corp (NASDAQ:WDC) declared a quarterly dividend of $0.50 per share, in-line with previous dividend payout, which based on its current trading price translates into a forward yield of 3.47%. Since the start of 2015, Western Digital has lost almost half of its market capitalization, which according to some analysts has made the stock undervalued at current levels. On October 27, a day after the company reported better-than-expected results for the third quarter, several analysts hiked their price target on the stock. This included analysts at Susquehanna, who reaffirmed their ‘Positive’ rating and upped the price target to $88 from $80, signifying a potential upside of 52.6%.

#1 Nu Skin Enterprises, Inc. (NYSE:NUS)

– Shares Owned by Skybridge Capital (as of September 30): 364,181

– Value of the Holding (as of September 30): $23.59 million

Nu Skin Enterprises, Inc. (NYSE:NUS) continued to remain Skybridge Capital’s top equity pick while entering the last quarter of 2016. Shares of the direct selling personal products company have had a remarkable rally this year. Although the stock has cooled down considerably since the start of the last month, it is still trading up 43% year-to-date. Nu Skin Enterprises, Inc. (NYSE:NUS) has consistently hiked its quarterly dividend every year in the past 16 years and currently sports a respectable annual dividend yield of 2.62%. However, several analysts are still wary of deeming it as a good dividend stock citing the company’s over dependence on Asian economies and lower dividend growth rate since 2014, when it was investigated by Chinese regulators. Hedge funds covered by us that reduced their holdings in Nu Skin Enterprises during the third quarter included Eric Sprott’s Sprott Asset Management and Ray Carroll’s Breton Hill Capital.

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Disclosure: None