Different hedge fund firms might employ diverse re-balancing methods and follow a specific frequency, but the August and September sell-offs have definitely forced most money managers to re-balance their portfolios. At the end of the day, each hedge fund manager develops its optimal portfolio that match up a preferred risk/reward profile. Having that in mind, this article will discuss five moves made by several hedge funds and other investors tracked by the Insider Monkey team.
Hedge funds have been underperforming the market for a very long time. However, this was mainly because of the huge fees that hedge funds charge as well as the poor performance of their short books. Hedge funds’ long positions performed actually better than the market. Small-cap stocks and activist targets were among the bright spots in hedge funds’ portfolios. For instance, the 15 most popular small-cap stocks among hedge funds outperformed the market by more than 53 percentage points since the end of August 2012 (read more details here). This strategy also managed to beat the market by double digits annually in our back tests covering the 1999-2012 period.
In a freshly-filed 13G with the U.S. Securities and Exchange Commission, Healthcor Management L.P, founded by Arthur Cohen and Joseph Healey, reported an ownership stake of 575,219 shares in SeaSpine Holdings Corp (NASDAQ:SPNE), which account for 5.18% of the company’s outstanding stock. This represents a new position for the investment firm. The shares of SeaSpine Holdings Corp (NASDAQ:SPNE) have lost 15% since the completion of its spin-off from Integra Lifesciences Holdings Corp (NASDAQ:IART) on July 2. The company seems to be well-positioned to progress in the spine market and has a strong balance sheet, but it might take some time until the market will realize the full potential of its existing pipeline of products. Ken Fisher’s Fisher Asset Management acquired a 169,780-share stake in SeaSpine Holdings Corp (NASDAQ:SPNE) during the third quarter.
Another Schedule 13G filing disclosed that Robert I. Usdan and Wayne K. Goldstein’s Endicott Management currently holds 600,577 shares of Unity Bancorp Inc. (NASDAQ:UNTY), representing 7.13% of its outstanding common stock. This marks an increase of 388,877 shares from the position disclosed in the 13F filing for the June quarter. The bank holding company for Unity Bank has seen its stock advance by nearly 10% since the beginning of the year. However, it is worth mentioning that Unity Bancorp Inc. (NASDAQ:UNTY) is a low-volume stock, which means that trading this stock might be quite risky. It appears that the upcoming third-quarter earnings report will propel new trading interest in the company’s shares, and will also shed some light on the future development of the company. Endicott Management represents the only investor among the hedge funds tracked by Insider Monkey with a stake in Unity Bancorp Inc. (NASDAQ:UNTY).
Let’s turn the page of the article, where we will be discussing three additional moves made by hedge funds and other investors.
James Dondero’s Highland Capital Management disclosed owning 3.36 million shares in NexPoint Residential Trust Inc. (NYSE:NXRT) through a newly-amended 13D filing with the SEC. The freshly-disclosed stake accounts for 15.8% of the company’s outstanding stock and represents an increase from 2.64 million shares held as of the end of June. The shares of the privately-owned real estate investment trust have lost slightly more than 3% since its spin-off from Nexpoint Credit Strategies Fund (NYSE:NHF) on March 31. Meanwhile, seven hedge funds monitored by Insider Monkey had positions in NexPoint Residential Trust Inc. (NYSE:NXRT) at the end of the second quarter, amassing 13.80% of the company’s shares. The value of their investments added up to $39.68 million. Israel Englander’s Millennium Management owns 20,702 shares of NexPoint Residential Trust Inc. (NYSE:NXRT) as of June 30.
A recently-submitted 13D filing with the SEC revealed that Mario Gabelli’s GAMCO Investors and its affiliates own a 860,394-share stake in Madison Square Garden Co (NYSE:MSG), which represents 4.22% of the company’s shares. The bulk of 13F filings for the June quarter had disclosed that GAMCO Investors owned 9.25 million shares of the former Madison Square Garden Company, which split into two separate public companies effective October 1. Thus, the aforementioned 13D was filed as a result of the split so as to reflect the change in ownership. To be more specific on that, each Class A shareholder of the former Madison Square Garden Company received one share of MSG Class A common stock in exchange for three shares of Class A common stock of the former company. Madison Square Garden Co (NYSE:MSG) retained the name of the former company and represents the sports and entertainment business unit, while MSG Networks Inc. (NYSE:MSGN) holds the regional cable-TV sports networks after the spin-off (read more details here).
As stated by another 13D filing, Seth Fischer’s Oasis Management currently holds 1.24 million shares in Carmike Cinemas Inc. (NASDAQ:CKEC). This freshly-disclosed stake accounts for 5.0% of the company’s outstanding common stock. At the same time, the public filing outlined Oasis Management’s belief that the shares of the motion picture exhibitor are undervalued and represent an attractive investment opportunity. The investment firm also plans to discuss with Carmike Cinemas Inc. (NASDAQ:CKEC)’s shareholders, management, and Board of Directors regarding strategic alternatives that include a potential sale of the company. In the meantime, there were 24 hedge funds tracked by our team invested in the company at the end of the second quarter, compared to 29 registered in the prior one. Similarly, the value of the capital poured into the stock declined to $140.56 million from $212.83 million. It is also worth mentioning that these hedge funds stockpiled 21.60% of the company’s shares on June 30. Ken Griffin’s Citadel Investment Group holds approximately 614,000 shares of Carmike Cinemas Inc. (NASDAQ:CKEC) as of June 30.