Tampa-based boutique investment management firm, Gator Capital Management, LLC, released its Q2 2019 Investor Letter – a copy of which can be downloaded below. It specializes in managing concentrated, non-diversified equity portfolios of financial businesses with attractive valuations and proven profitability. The company aims to build wealth for individuals and institutions by means of outperforming all market benchmarks. Founded by Derek Pilecki in 2008, Gator Capital Management offers two strategies to their clients – a long/only financials equity strategy and a financials sector long/short equity strategy. Pilecki worked with several investment management companies and held various positions prior to founding Gator Capital Management. These companies include Goldman Sachs Asset Management, Clover Capital Management, and Fannie Mae. This CFA charterholder holds a bachelor’s degree from Duke University and a master’s degree from the University of Chicago.
In its recent Investor Letter, Gator Capital Management announced a 3.85% gain during the second quarter. The fund lagged the overall market but still manages to outperform benchmarks on a year-to-date (YTD) basis.
“Dear Gator Financial Partner:
We are providing you with Gator Financial Partners, LLC’s (the “Fund” or “GFP”) Q2 2019 investor letter. This letter reviews the Fund’s investment performance for the second quarter of 2019, discusses the current upside opportunity we see in our portfolio, analyses our investment in SLM Corp., and discusses the Fund’s current net exposure and positioning by sub-sector.
2nd QUARTER PERFORMANCE
For the 2nd quarter of 2019, we lagged the Financials sector benchmark and the overall market, but we continue to outperform our benchmarks on a year-to-date basis. The Fund gained 3.85% in the second quarter. Fannie Mae preferred stock, Blackstone, Carlyle Group, and Ally Financial were top contributors to performance. The largest detractors were Kingstone Companies, Ambac, BBX Capital, and Barclays. We did not sell any positions of note. We added a new position in Goldman Sachs. We forwarded our investment thesis on Goldman to you in late June.
The Fund’s portfolio had a positive return in Q2. The private equity firms were strong during Q2. As we anticipated, Blackstone announced that it would convert from a publicly-traded partnership to a C Corporation as of July 1, 2019. The announcement of the C Corp conversion led to an increase in Blackstone’s stock price in anticipation of increased demand from an expanded universe of potential investors and likely demand from index funds as Blackstone’s shares are added to various stock market indices.
Among the detractors during the quarter was our position in Kingstone Companies, which we wrote about in April 2017. Kingstone is a homeowner’s insurance company based in New York. We purchased the position as the company grew quickly on Long Island as State Farm and Allstate pulled back after Super Storm Sandy. Since then, Kingstone has continued to grow quickly and profitably. Recently, the company expanded into additional states in the Mid-Atlantic and New England regions. Earlier this year, the company added to its loss reserves after reviewing its claims. We think the stock has overreacted and represents a good value.”
You can download a copy of Gator Capital Management LLC’s Q2 2019 Investor Letter here:
You can also see the list of our 2019 Q2 investor letters and download them on this page.