Alexander Medina Seaver’s Stadium Capital Management hasmade a move to cash in on its top pick Builders FirstSource, Inc. (NASDAQ:BLDR) following the explosive growth of the stock after its $1.63 billion acquisition of privately-held ProBuild, an industry leader in the building materials industry. Seaver sold just over 2.55 million shares between April 13 and April 15, at an average price of about $12.62 per share according to a Form 4 filing with the SEC, bringing his total share ownership down to just over 9.60 million shares, a 9.8% stake in the company.
Shares of Builders FirstSource, Inc. (NASDAQ:BLDR) nearly doubled from $6.90 to $13.59 over the next two trading sessions following its April 13 acquisition, which prompted Seaver to cash in on some of his sizable stake in the company. Builders FirstSource, Inc. (NASDAQ:BLDR) was already his largest position even before the huge spike in value, with his most recent 13F filing reporting ownership of 12.40 million shares valued at $85.16 million, with his equity portfolio having 21.35% exposure to the stock. Builders FirstSource shares were down 2.9% during the first quarter.
The huge April growth sets Seaver up for a massive Q2, which will elude other investors in our database as far as this particular stock goes, as few had noteworthy positions. Dov Gertzulin’s DG Capital Management, a fund recently added to our database, owned just under 619,000 shares which gave it 2.66% exposure to the stock, the next highest after Seaver.
Let’s briefly run through the Q1 returns of Seaver’s other top picks now, beginning with Insperity Inc (NYSE:NSP), with whom Seaver has had an uncharacteristically rocky relationship. While being an activist investor, Seaver has rarely had to resort with airing grievances publicly, doing so only three times according to the fund’s Dominic Demarco. One of those times involved Insperity Inc (NYSE:NSP), with Stadium Capital sending a letter to the company’s shareholders last year outlining the inefficiencies and poor performance of the company, and pushing for multiple changes.
More recently, another activist, Jeffrey Smith of Starboard Value has entered the fray, taking a position in Insperity Inc (NYSE:NSP) during the fourth quarter and suggesting a host of changes that could positive affect the company’s bottom line. It also urged the company to consider selling itself. Shares of Insperity gained a boost after Smith’s activist position was revealed in January and ended up having a huge first quarter, rising by over 54%. Stadium’s 2.43 million share position was valued at $82.33 million and represented 20.64% of its equity portfolio at the end of 2014. The weighted average returns of Seaver’s top two picks, which accounted for 42% of his equity portfolio, are a stunning 72% year-to-date, setting him up for a monster 2015.
Ascena Retail Group Inc (NASDAQ:ASNA), his third pick, also enjoyed a strong Q1, gaining 15.53%. Seaver had 18.77% exposure to the stock through a position of 5.96 million shares valued at $74.88 million. A specialty retailer of women’s fashion as well as clothing for tweens, Ascena Retail Group Inc (NASDAQ:ASNA) has rebounded in 2015 following a poor 2014 in which shares declined by over 40%. Future growth appears to be limited at present however, with the company’s revenue and earnings stagnant (and declining in the latter case). Regardless, two other funds anticipated a rebound for Ascena Retail Group Inc (NASDAQ:ASNA), opening large new positions in the fourth quarter; Steve Tannenbaum’s Greenwood Investments, and Cristopher Shackleton and Adam Gray’s similarly-named (to Stadium Capital) Coliseum Capital.
A position in Express, Inc. (NYSE:EXPR) was Stadium Capital’s fourth-largest, and it also had a strong quarter, gaining 12.53%. Stadium owned 2.53 million shares valued at $37.95 million at the end of 2014, the position having been increased by 45% during the fourth quarter. Another specialty clothing retailer, Express, Inc. (NYSE:EXPR) also dipped in 2014, by about 24%. Unlike Ascena, Express appears better positioned for growth under its new management, and is currently trading at lower P/E and P/S ratios. Clint Carlson’s Carlson Capital owns the largest stake out of the investors in our database, though it trimmed the position slightly during the fourth quarter, by 2%.
Lastly, Columbia Banking System Inc (NASDAQ:COLB) is another stock that Stadium enjoyed good returns with during the first quarter, in this case returns of 6.08%. Columbia Banking System Inc (NASDAQ:COLB) was one of Stadium’s two new positions in its latest 13F filing, and consisted of just under 958,000 shares valued at $26.45 million. The holding company for the Columbia State Bank and Bank of Astoria will release its latest earnings report on Wednesday. Interested investors will include billionaires Israel Englander and D.E Shaw, who have positions in Columbia Banking System Inc (NASDAQ:COLB).
Following activist funds like Stadium Capital is important because it is a very specific and focused strategy in which the investor doesn’t have to wait for catalysts to realize gains in the holding. A fund like Stadium can simply create its own catalysts by pushing for them through negotiations with the company’s management and directors. In recent years, the average returns of activists’ hedge funds have been much higher than the returns of an average hedge fund. Furthermore, we believe do-it-yourself investors have an advantage over activist hedge fund investors because they don’t have to pay 2% of their assets and 20% of their gains every year to compensate hedge fund managers. Soon, we’ll be releasing a new quarterly newsletter written by former activist hedge fund analyst Michael Bland that tracks 10 or so activist campaigns at any given time.
Disclosure: None
