Jeffrey Bronchick’s and Cove Street Capital’s Top Stock Picks

During the third quarter, Jeffrey Bronchick’s Cove Street Capital has reshuffled its portfolio, though Approach Resources Inc. (NASDAQ:AREX) continues to be its top holding. Cove Street Capital’s latest 13F filing with the Securities Exchange Commission (SEC) show that the fund reduced its exposure in second largest holding for the second-quarter, Taminco Corp (NYSE:TAM), significantly to dislodge it from the second spot. Following that, the erstwhile third and fourth top holdings of the fund, Forestar Group Inc. (NYSE:FOR) and White Mountains Insurance Group Ltd (NYSE:WTM), have now taken the second and third spot respectively.

Jeffrey Bronchick - Cove Street Capital

Cove Street Capital employs value-based strategies for its investments. Its Chief Investment Officer, Jeffrey Bronchick, was earlier the Chief Investment Officer and a lead principal of Reed Conner & Birdwell, LLC for 22 years. According to the latest filing, the fund’s equity portfolio is worth over $640 million, with majority of it invested in financials followed by basic materials sector.

Still Bullish on Approach Resources and Forestar Group

Approach Resources Inc. (NASDAQ:AREX) not only remains as the largest holding of Cove Street Capital, but the fund also increased its stake in the company by over 517,000 shares to over 2 million shares. During the third quarter, shares of Approach Resources Inc. (NASDAQ:AREX) fell by more than 36%, which possibly explains why the fund increased its stake in the company. Other institutional investors who are bullish on the company include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Chuck Royce’s Royce & Associates. During the second quarter, Arrowstreet Capital increased its stake by 360% to around 780,000 shares and Royce & Associates increased its stake by over 5600% to over 685,000 shares.

Just like Approach Resources Inc. (NASDAQ:AREX), the fund also increased its stake in its current second largest holding, Forestar Group Inc. (NYSE:FOR). The fund bought over 51,000 additional shares to take its total holding to over 1.6 million shares. Forestar Group Inc. (NYSE:FOR)’s shares dropped more than 7% during the third quarter. Geoffrey Raynor’s Q Investments (Specter Holdings) is another major institutional investor who is bullish on the company. Apart from increasing its stake by 25% to over 568,000 shares, Q Investments (Specter Holdings) also held 1 million bonds of the company during the end of second quarter.

Trimmed Exposure to White Mountains Insurance

White Mountains Insurance Group Ltd (NYSE:WTM) is the only stock among the top three holdings that was up during the third quarter (by 3.6%). Moreover, it was also the only stock among the top three in which the fund reduced its stake, although marginally. The fund sold 1,303 shares of the company to bring its total holding down to fewer than 41,000 shares.  Among the hedge funds we track, Martin Whitman’s Third Avenue Management and Scott Wallace’s Wallace Capital Management are the largest shareholders of White Mountains Insurance Group Ltd (NYSE:WTM). During the end of second quarter, Third Avenue Management held over 190,000 shares and Capital Management held over 75,000 shares of the company.

Disclosure: None