Ken Gray and Steve Walsh‘s Bryn Mawr Capital recently submitted its 13F filing with the U.S. Securities and Exchange Commission for the financial quarter ending March 31. The filing reveals that the firm has a public equity portfolio valued at $761.89 million, down slightly from the $790.89 million it contained as of the previous reporting period. The Pennsylvania-based Bryn Mawr Capital was founded by Ken Gray and Steve Walsh and has been investing mainly in financial stocks, with only a small share of its assets allocated towards public equities and options. The fund’s investment strategy has attracted several analysts and we have been monitoring its activity for nearly three years now. In this article, we will focus on Bryn Mawr’s small-cap picks, which are Armstrong World Industries, Inc. (NYSE:AWI), IBERIABANK Corp (NASDAQ:IBKC), and Umpqua Holdings Corp (NASDAQ:UMPQ).
Why are we interested in the 13F filings of a select group of hedge funds? We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole; yet investors have been stuck (until now) investing in all of a hedge fund’s stocks: the good, the bad, and the ugly. 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? These top small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Even better, since the beginning of forward testing at the end of August 2012, the strategy worked just as our research predicted and then some, outperforming the market every year and returning 142% over the last 33 months, which is more than 84 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).
At the end of the first quarter, Bryn Mawr Capital held a total of 180,120 shares of Armstrong World Industries, Inc. (NYSE:AWI), with the position having a market value of $10.35 million. The position was a big increase from the 45,500 shares it held at the end of 2014. AWI recently announced that it’s investing up to $11 million in its Beverly, West Virginia facility, which will be a notable upgrade to the company’s activities in the area, being one of the leading employers in Randolph County. The flooring products manufacturer has attracted the attention of Wall Street analysts, who have given it a consensus rating of “Hold” from 11 analysts and received an average price target of $61.00 from 10 analysts, indicating upside of about 10%. The company’s most recent earnings report showed that it achieved earnings per share of $0.37, falling short of Thomson Reuters consensus estimate of $0.39 per share. The company’s revenue for the period also missed estimates, coming in at $551.40 million compared to the $594.30 million that was forecasted by analysts. During the first quarter, Armstrong World Industries, Inc. (NYSE:AWI) had a total of eight billionaire hedge funds invested in it, up from five in the fourth quarter of 2014. The total number of hedge funds that invested in the stock out of those we monitor was 33, having $1.58 billion invested in aggregate. These funds included Jeffrey Ubben’s ValueAct Capital, Eric Mindich’s Eton Park Capital, and Masroor Siddiqui and Bruce Emery‘s Naya Capital.