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Bernard Selz’s Top New Picks For Q3

Bernard Selz’s hedge fund Selz Capital is a New York-based fund which offers investment advisory services regarding the security portfolios of individuals, as well as small businesses. At the end of the second quarter of 2015, Selz Capital had a diversified portfolio, with 22% of its total value invested in the consumer discretionary sector, 21% in transports, 17% in energy, 13% in healthcare, and 11% in finance. There were 70 total positions held by the fund, and its public equity portfolio was valued at $554.04 million at the end of the second quarter. During the quarter, Selz Capital made a few investments in new positions, nine total, and we’ll take a look at the top three of those stocks in this article. They are Allergan PLC (NYSE:AGN), Spirit Airlines Incorporated (NASDAQ:SAVE), and Medallion Financial Corp (NASDAQ:TAXI).

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Professional investors like Selz spend considerable time and money conducting due diligence on each company they invest in, which makes them the perfect investors to emulate. However, we also know that the returns of hedge funds on the whole have not been good for several years, underperforming the market. We analyzed the historical stock picks of these investors and our research revealed that the small-cap picks of these funds performed far better than their large-cap picks, which is where most of their money is invested and why their performances as a whole have been poor. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic the best ideas of the best fund managers on your own? A portfolio consisting of the 15 most popular small-cap stock picks among the funds we track has returned more than 139% and beaten the market by more than 80 percentage points since the end of August 2012 (see the details).

Bernard Selz
Bernard Selz
Selz Capital

The fund acquired a new position in Allergan PLC (NYSE:AGN), purchasing 134,000 shares with a value of $40.6 million at the end of the second quarter. This formed 7.34% of the fund’s total portfolio holdings and vaulted Allergan into the second spot int he fund’s portfolio. Allergan PLC (NYSE:AGN) is a multi-specialty healthcare company focused on developing and commercializing innovative pharmaceuticals, biologics, medical devices, and over-the-counter products. It has a market capitalization of $124.5 billion, with a reported profit of $4.23 billion for the quarter ending 31 March, 2015. Recently, Allergan said it would buy Kythera Biopharmaceuticals Inc (NASDAQ:KYTH) in a cash-and-stock deal valued at about $2.1 billion, to expand its line of cosmetic treatments. The company said it expects the deal to begin adding to its earning per share after 2016. Andreas Halvorsen‘s Viking Global had the largest position in Allergan among the funds we track as of March 31, holding over 6.10 million shares.

Selz Capital acquired 130,000 shares of Spirit Airlines Incorporated (NASDAQ:SAVE) valued at $8.07 million during the second quarter. The position amounted to 1.46% of the fund’s total portfolio value. Spirit Airlines, Inc. is an airline company which operates an all-Airbus fleet, flying more than 300 daily flights to 56 destinations in the United States, the Caribbean, and Latin America. Its ultra-low-cost carrier (ULCC) business model provides low base fares with a range of optional services. It has a market capitalization of $4.38 billion. In its first quarter earnings report the company’s profit growth was in-line with analysts’ expectations. But for the second quarter, the company expects lower operating income relative to last year’s strong performance, as its operations were negatively impacted by numerous cancellations related to adverse weather. The top shareholders of Spirit Airlines Incorporated (NASDAQ:SAVE) as of March 31, among the smart money we track, were Jacob Doft‘s Highline Capital Management, which opened a new position of just over 900,000 shares during the quarter, and Robert Polak’s Anchor Bolt Capital.

Selz Capital LLC had 700,000 shares of Medallion Financial Corp (NASDAQ:TAXI) with a value of $5.84 million at the end of second quarter, another major new position for the fund, amounting to 1.06% of its total portfolio. Medallion Financial Corp (NASDAQ:TAXI) is a specialty finance company, which through its subsidiaries, is engaged in originating, acquiring, and servicing loans that finance taxicab medallions and various types of commercial businesses. It has a market cap of $2.21 billion. The company reported a 4% increase in profit for the first quarter of 2015 compared to the first quarter of last year, though its profit in the first quarter was mostly realized through gains earned by the selling of stakes in Generation Outdoor and Medallion Hamptons Holding. The realized gain was $0.32 per share during the quarter. Another prominent shareholder of the stock is Harvest Capital Strategies, founded by Joseph A. Jolson. The fund has 392,881 shares of the company as of March 31.

Disclosure: None

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