As hedge funds are continuing to disclose their holdings as of the end of the first quarter, Ray Carroll‘s Breton Hill Capital has also filed its 13F filing with the Securities and Exchange Commission.
Prior to establishing Breton Hill in 2011, Carroll was on the management committee of Diversified Global Asset Management, a Toronto-based multi-billion dollar alternative investment firm. Breton Hill has both private and public investment funds, the former being launched in 2011 with $100 million seed capital from CalPERS, the largest pension money manager in the US. The investment was withdrawn in 2014, as CalPERS became unsatisfied with huge hedge fund fees and pulled nearly $4 billion out of the hedge funds that it had supported. The investment strategy of Breton Hill aims to profit from macro-inefficiencies using a mixture of rigorous quantitative research and investment acumen of its experienced market practitioners. While the assets under the fund’s management total $699 million, the market value of its equity portfolio at the end of March stood at $374.14 million.
There was a significant amount of reshuffling in Breton Hill’s equity portfolio during the March quarter and its turnover ratio stood at 123.56%. The new top picks included Kraft Foods Group Inc (NASDAQ:KRFT), LyondellBasell Industries NV (NYSE:LYB), Mid-America Apartment Communities Inc (NYSE:MAA), Corrections Corp Of America (NYSE:CXW), and Darden Restaurants, Inc. (NYSE:DRI).
Breton Hill is one of over 700 hedge funds that we follow at Insider Monkey. We track these funds since our research demonstrated that their stock picks historically managed to generate alpha even though the filings are delayed by 45 days. We used a 60-day delay in our back tests to be on the safe side. Our research has shown that the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. After adjusting for risk, our calculations revealed that these stocks’ monthly alpha was 80 basis points. We have also been sharing and tracking the performance of these stocks since the end of August 2012. These stocks returned 132% over the last 2.5 years, outperforming the S&P 500 ETF (SPY) by nearly 80 percentage points (see more details here).
Breton Hill acquired some 4,400 shares of Kraft Foods Group Inc (NASDAQ:KRFT) during the first quarter to take its total stake to about 99,000 shares valued at $8.63 million. Although it is the largest equity holding, the position represents 2.31% of Breton Hill’s equity portfolio. Kraft Foods Group Inc (NASDAQ:KRFT) has appreciated by an impressive 35.73% year to date. The $50.49 billion packaged food and beverage company’s stock spiked after news of the company’s merger with H.J Heinz Company. The deal is backed by the legendary investor Warren Buffett‘s Berkshire Hathaway and Jorge Paulo Lehmann’s Brazil-based 3G Capital, who jointly acquired Heinz for $23 billion in 2013. Kraft Foods Group Inc (NASDAQ:KRFT)’s shareholders are expected to receive a special dividend of $16.50 upon the completion of the merger. Among other prominent investors of Kraft Foods Group Inc (NASDAQ:KRFT) is Ken Griffin’s Citadel Investment Group, which held about 1.74 million shares at the end of 2014.
With nearly 91,800 shares valued at $8.06 million, LyondellBasell Industries NV (NYSE:LYB) represents Berton Hill’s second largest holding. The $49.26 billion plastics, chemicals and refining company has benefitted substantially from the declining price of its gas-based raw materials. LyondellBasell Industries NV (NYSE:LYB)’s stock is up by a hefty 29.88% year to date amid a first quarter EPS of $2.54 which beat estimates by $0.56. Revenues of $8.19 billion, however, missed expectations by $1.29 billion. George Soros’ Soros Fund Management initiated a position in the company during the fourth quarter.
Mid-America Apartment Communities Inc (NYSE:MAA) represents Breton Hill’s largest bet in the finance sector, which represents nearly 20% of the fund’s equity holdings. The newly initiated stake comprises of 97,527 shares valued at 7.54 million. Mid-America Apartment Communities Inc (NYSE:MAA) is a REIT that is primarily focused on multifamily homes in the Southeast and Southwest regions of the US. It offers a dividend yield of 4.13%. According to our database, Ken Fisher‘s Fisher Asset Management is the largest stockholder of Mid-America Apartment Communities Inc (NYSE:MAA).
Corrections Corp Of America (NYSE:CXW) is another one of Breton’s holdings in the finance sector, specifically in the Specialized REITs industry, with 175,345 shares valued at $7.06 million, up by 161,468 shares over the quarter. From designing, building, to operating prisons, jails, detention centers, and residential reentry centers, Corrections Corp Of America (NYSE:CXW) takes care of every aspect of correctional facilities. During the fourth quarter the company completed the activation of 480 beds for the US Immigration and Customs Enforcement at the South Texas Family Residential Center. Among the funds we track, Ric Dillon’s Diamond Hill Capital increased its stake in Corrections Corp Of America (NYSE:CXW) by 3% to 1.22 million shares during the fourth quarter.
Another newly initiated stake during the first quarter was in Darden Restaurants, Inc. (NYSE:DRI) with about 100,300 shares valued at $6.96 million. The $8.18 billion full service restaurant company’s stock is up by 9.76% year to date. It seems that the turnaround efforts of the activist investor, Jeffrey Smith’s Starboard Value are improving Darden Restaurants, Inc. (NYSE:DRI)’s profitability after a poor growth period. Starboard Value held about 11.64 million shares of Darden Restaurants, Inc. (NYSE:DRI), according to its latest 13F filing.
Disclosure: None
