Crispin Odey‘s London-based fund Odey Asset Management was founded in 1991 and counts George Soros as one of its original backers. The fund has had a topsy turvy ride since then, with 2008 being one of its best years. The fund returned nearly 55% that year as its bearish bets on European banks bore fruit. With $14.6 billion worth of assets under management, Odey is no small concern. The market value of his public equity portfolio stood at $1.76 billion at the end of the first quarter compared to $3.26 billion at the end of 2014. Among other things, the fund sold out of 12 positions and reduced its stake in 31 holdings, including reducing its stake in all three of its top small-cap holdings according to the fund’s latest 13F filing with the Securitites and Exchange Commission. That list includes First American Financial Corp (NYSE:FAF), Ryland Group Inc (NYSE:RYL), and KB Home (NYSE:KBH), which we’ll look at in this article.
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 delivered a monthly alpha of six basis points, though these stocks 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 144% and beating the market by more than 84 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise rather than large-cap stocks.
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Odey slashed his stake in First American Financial Corp (NYSE:FAF) by 20% in the first quarter to 2.27 million shares valued at $81.17 million. The holding represented 4.6% of the fund’s portfolio value. However, among over 700 hedge funds that we track, interest in First American Financial Corp (NYSE:FAF) has increased, at least in terms of ownership: 23 funds had invested a total of $472.78 million in the company at the end of March as compared to 18 funds with $559.42 million at the end of the previous quarter. The $3.9 billion provider of financial services’ stock is up by a healthy 26.2% over the past year. In its financial results for the first quarter, First American Financial Corp (NYSE:FAF) beat estimates for both the top and bottom lines. A major component of its revenue rise were its closed refinance orders, which saw a rise of 62% on a year-over-year basis. Since a new integrated mortgage rule becomes effective in August, First American Financial Corp (NYSE:FAF) is expecting temporary delays in closings on orders. John W. Rogers‘ Ariel Investment holds 7.7 million shares of the company valued at $274.85 million.