After a rough first-half of 2016, Ron Bobman‘s Capital Returns Management rebounded in a big way during the third-quarter. The finance-focused hedge fund’s long positions in companies valued at $1 billion or more on June 30 delivered weighted average returns of 20.8% in the third-quarter, ranking it as one of the top-20 performing hedge funds in our database for the period.
It should be noted that our calculations may differ from the fund’s actual returns, as they do not factor in changes to positions during the quarter, or positions that don’t get reported on Form 13Fs, like short positions. They also don’t include the returns of stakes in equities valued at less than $1 billion, of which Capital Returns had several on June 30. Of its 16 long positions, just seven of them were in companies valued at more than $1 billion.
In this article we’ll take a look at four of those positions and see how they fared during the third-quarter and since.
We’ll start with Assured Guaranty Ltd. (NYSE:AGO), Capital Returns top stock pick on June 30. The fund held 713,280 shares of the stock valued at $18.10 million and representing 10.11% of the value of its public equity portfolio. Assured Guaranty had a solid quarter, returning about 10%, but has actually performed even better in the fourth-quarter, which could bode well for the fund’s returns if it maintained its position. Assured Guaranty Ltd. (NYSE:AGO) jumped by 8% on Friday after it posted results which shattered its numbers from a year earlier. Shares have now gained nearly 15% in the fourth-quarter.
At the end of the second quarter, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in the stock. Sentiment has failed to appreciably improve since sliding during the fourth-quarter of 2015. Those funds that were bullish on June 30 included Fine Capital Partners, managed by Debra Fine ($78.2 million position) and AQR Capital Management, managed by Cliff Asness ($50.9 million position). Some other hedge funds and institutional investors that were bullish on Assured Guaranty Ltd. (NYSE:AGO) encompass Anand Parekh’s Alyeska Investment Group, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Ron Gutfleish’s Elm Ridge Capital.
Let’s move on to Radian Group Inc (NYSE:RDN), which was Capital Returns’ third favorite stock on June 30. Radian Group was one of the fund’s best performing stocks, gaining 30% during the third-quarter. Despite the quarterly gains, shares are still down by a few percentage points this year. While still well off their pre-financial crisis levels, shares have gained 365% over the past five years.
A total of 31 of the hedge funds tracked by Insider Monkey held long positions in Radian Group Inc (NYSE:RDN) at the end of June, a 7% increase from the end of the previous quarter. Maverick Capital, managed by Lee Ainslie, holds the most valuable position in Radian Group Inc (NYSE:RDN) as of June 30, a $145.3 million position comprising 2% of its 13F portfolio. The second-largest stake is held by Senator Investment Group, led by Doug Silverman and Alexander Klabin, being an $83.4 million position.
We’ll check out two other finance stock picks of Capital Returns on the second page of this article.
Voya Financial Inc (NYSE:VOYA) is next, being Capital Returns’ fourth-most valuable holding and another one which posted a strong quarter, returning 16%. Shares of the company have continued to trend upwards in the fourth-quarter, despite a small hiccup after CFO Ewout Steenburgen resigned in the middle of October to take on the same role at S&P Global Inc (NYSE:SPGI). Capital Returns owned 699,716 shares of Voya Financial Inc (NYSE:VOYA) at the end of June, hiking its position by 47% during the second-quarter.
Other funds in our system were also bullish on the stock during the quarter, as 37 of the hedge funds tracked by Insider Monkey were shareholders of it at the end of June, 23% more than there were a quarter earlier. Pzena Investment Management, managed by Richard S. Pzena, held a $375.7 million position in the stock on June 30, while David Einhorn of Greenlight Capital held a $122.4 million position. Some other hedge funds and institutional investors that were bullish contained D E Shaw, Israel Englander’s Millennium Management, and Alok Agrawal’s Bloom Tree Partners.
Lastly, let’s see what’s been happening with MGIC Investment Corp. (NYSE:MTG), which Capital Returns owned 2.88 million shares of on June 30, valued at $17.11 million. MGIC was another big performer for the fund, gaining over 33% during the third-quarter. It also stands as one of the most popular finance stocks among the collection of successful hedge funds that we follow, as over 30% of its shares were held by that group on June 30. In total, 46 of the hedge funds in our database were long MGIC Investment Corp. (NYSE:MTG), up by 24% quarter-over-quarter.
John Paulson’s Paulson & Co had the number one position in MGIC Investment Corp. (NYSE:MTG), worth close to $127.1 million, amounting to 1.3% of its total 13F portfolio. The second-most bullish fund manager was Doug Silverman and Alexander Klabin’s Senator Investment Group, with a $65.5 million position. Other members of the smart money that held long positions consisted of Kerr Neilson’s Platinum Asset Management, Howard Marks’ Oaktree Capital Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.