A new 13D filing with the SEC revealed that Firefly Value Partners, managed by Ryan Heslop and Ariel Warszawski, currently owns 421,770 shares of ASB Bancorp Inc. (NASDAQ:ASBB), which represent 9.6% of the company’s outstanding common stock. The investor only reiterated the size of its position and changed the nature of its investment to activist and disclosed a letter sent to the company’s board. In another filing, Carlson Capital, founded and overseen by Clint Carlson, disclosed an increase of its position in Ultratech Inc. (NASDAQ:UTEK) by 167,440 shares to 3.38 million shares, which represent 12.25% of the company.
Why do we track the hedge fund activities? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect the hedge funds’ activities. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period hedge funds’ top small cap stocks edged the S&P 500 index by double digits annually. The 15 most popular small cap stock picks among hedge funds also bested passive index funds by around 66 percentage points over the 35-month period beginning with September 2012 (read the details here).
According to its letter, Firefly, which has been a shareholder of ASB Bancorp since October of 2011, believes that a sale of ASB Bancorp is currently the best way to maximize the shareholder value of the company. Firefly Value Partners added that ASB’s small size hinders its ability to generate attractive or at least satisfactory returns. Precisely, ASB Bancorp, which had $783 million in assets at the end of June, earned a return on assets of less than 0.5% and a return on equity of less than 4% during the second quarter of this year. Firefly Value Partners also suggested that a larger institution that might potentially acquire ASB, would be able to make a better use of ASB’s assets and earn higher returns. As a result, the hedge fund calls for a competitive auction process to identify potential acquirers. Ultimately, it’s not entirely clear whether the Board of ASB Bancorp will agree to the aforementioned proposal, but the stock might represent a good buying opportunity as long as the possibility of a potential buyout exists.
Within our database, Anton Schutz’s Mendon Capital Advisors is the second largest shareholder in ASB Bancorp Inc. (NASDAQ:ASBB) with 136,570 shares.
Firefly Value Partners is a New York-based hedge fund co-established by Ryan Heslop and Ariel Warszawski in May 2006. The investment firm employs a long/short equity strategy to invest its capital. Moreover, the firm conducts in-house research when seeking for investing opportunities in the U.S. public equity markets. According to its most recent 13F filing, Firefly Value Partners manage a public equity portfolio worth $794.29 million as of March 31, whereas the fund’s top ten holdings account for 68.61% of its entire portfolio.
Let’s now move on to Carlson Capital, which is another hedge fund we are discussing in the following article. Carlson Capital LP is a multi-strategy hedge fund founded by Clint Carlson in 1993. The firm’s multi-strategy approach consists of risk arbitrage, convertible arbitrage, relative value arbitrage, distressed/credit arbitrage, and long/short strategies. Carlson Capital currently oversees more than $6 million in assets under management. Meanwhile, the fund manages a public equity portfolio with a market value of $8.97 billion, with the top ten holdings representing only 16.66% of its entire portfolio.