Andrew Wallach and Jason Ader‘s SpringOwl Associates and Jeffrey Bronchick (pictured)‘s Cove Street Capital have succeeded in shaking up the Forestar Group Inc. (NYSE:FOR) Board of Directors, which includes SpringOwl’s President Daniel B. Silvers being appointed to the Board. SpringOwl has ownership of 344,224 shares, a 1.0% stake, while Cove Street owns 2.13 million shares, a 6.1% stake.
SpringOwl Associates is the result of a 2013 merger between two small, activist hedge funds: Cumberland Associates, managed by Wallach, and Ader Investment Management, managed by Ader. Cumberland was founded in 1970, and over its 43 years of existence provided a 14.5% annualized return. Ader meanwhile was a much younger fund, though no less successful. The fund had returned 40% year-to-date at the time of the pair’s merger in 2013, and notably affected a board shakeup at gaming company International Game Technology (NYSE:IGT).
Cove Street Capital on the other hand is a value investment firm in the mold of Warren Buffett. The fund manages a focused portfolio of long positions, shunning the current trends to over-diversify and mimic indices. The fund runs a number of different portfolios with structured strategies, including small cap, all cap, and strategic portfolios. The fund is managed by Bronchick, who graduated from the University of Pennsylvania with a BA in Economics, and was formerly the Chief Investment Officer and a lead principal of Reed Conner & Birdwell, LLC, a Los Angeles based investment manager.
The two funds, part of an investor group which automatically terminated upon the new agreement being reached, collectively own 2.49 million shares, 7.1% of Forestar’s outstanding common stock. Given the termination of the investor group, Springowl’s ownership is once again below the 13D reporting threshold. Despite their vastly different ownership levels, the performance of the company has equal meaning to both funds; in fact the much smaller SpringOwl’s 1.0% stake accounted for 32.66% of the value of their entire $18.67 million equity portfolio as of September 30. Cove Street’s 6.1% stake on the other hand accounted for just 4.47% of that value of that fund’s $642 million portfolio.