Christopher Shackelton and Adam Gray‘s Coliseum Capital has filed a pair of forms with the SEC recently, disclosing two of the fund’s latest moves. In the first filing, the fund disclosed further trimming its activist stake in LHC Group, Inc. (NASDAQ:LHCG) to 1.94 million shares, representing 10.8% of the company’s outstanding shares. It reported owning just under 2.00 million shares in its most recent 13F filing, which was also released this week. The second filing concerns Insite Vision Inc. (OTCMKTS:INSV), in which it reported owning 3.82 million shares, a new passive position for the fund, which it did not report owning any shares of as of June 30 (the company was not even publicly-traded yet). The holding amasses 2.9% of Insite Vision’s common shares.
Coliseum Capital was founded by Shackelton and Gray in 2005, and is known for taking long-term positions in a small number of equities, making its portfolio highly concentrated. That dedication to the stocks it picks makes its new moves like that into Insite Vision all the more intriguing. Coliseum Capital manages a public equity portfolio valued at $295 million as of June 30, with just eight positions at the time and the majority of its capital held in five of those.
At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 123% and beating the market by more than 65 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.
Let’s begin with Coliseum’s position in Insite Vision Inc. (OTCMKTS:INSV), a $28.63 million developer of a sustained ocular drug delivery system called DuraSite, which can be used in combination with various drugs with the purpose of treating a number of conditions affecting the eyes. The system is capable of remaining on the eyes for up to six hours and supplying small doses of the medicine in question at regular intervals, making it a potentially superior treatment compared to concentrated forms of ocular drug delivery.
Coliseum Capital did have a position in Insite Vision Inc. (OTCMKTS:INSV) while it was a private company, so its public position isn’t entirely a new one in that sense. Insite Vision went public on August 10 and had a rough opening week, sliding by 27.67% to $0.217. Coliseum was reported as owning 12.89 million shares, a 9.62% stake in the company while it was private, according to the company’s S-1 form dated July 13. Kevin Kotler’s healthcare fund Broadfin Capital was also cited as a major shareholder at that time, owning 17.07 million shares, a 12.57% stake. Broadfin nor any other fund besides Coliseum Capital has yet to disclose ownership in the now-public company.