Hedge Fund 1060 Capital Management’s Top Stock Picks

1060 Capital Management is a Chicago based hedge fund, founded by Brian Gustavson, the portfolio manager, and Andre Haley, the fund’s Chief Operating Officer. Before starting the fund, Brian Gustavson obtained a rich experience in the field, which helped him shape the optimal strategy employed at 1060 Capital Management. He earned his B.S. in Finance from the University of Illinois, and he was employed at Balyasny Asset Management first as an analyst and later as a Senior Portfolio manager. Prior to founding 1060 Capital Management, he was also employed at Coe Capital Management and Arthur Andersen. 1060 Capital Management employs long/short strategy, focusing on industrial and consumer sectors. The investment procedure is based on active risk management, and it is catalyst-guided.

Since its inception, the fund had positive returns except two down years. After the first year, that is 2013, the fund returned 13.86%. In 2014, the annual return was 19.84%, which was also the fund’s peak performance. During the following two years, 2015 and 2016, the fund generated 8.90% and 9.52% respectively. In 2017 return was -6.88% and 2018 -1.57%. Year to date, the fund returned a positive 9.38% (as of May 2019), and generated an annualized return of 8.63%.

Brian Gustavson 1060 Capital

Insider Monkey’s mission is to identify promising (and also terrible) hedge fund stock pitches and share them with our subscribers. Our long strategy is based on the consensus picks of the 100 best performing hedge funds. This strategy was launched 5 years ago and generated a cumulative return of 115%. You can think of it as a mutual fund that returned 16.2% annually over the last 5 years, vs. 11.1% annual gain for the S&P 500 ETF (SPY). Basically we outperform the S&P 500 Index by 5 percentage points annually by identifying the top stock picks of the best hedge fund managers (see the details here). By tracking the best performing hedge funds we have been able to identify extremely attractive priced stocks (see our latest idea, a growth stock trading at less than 3 times its core earnings).

Our short strategy is based on shorting hedge fund hotels that are likely to experience large hedge fund sales during market weaknesses. We launched this strategy in February 2017. It’s been almost 2.5 years and the stock picks of this strategy lost a cumulative 24.7% vs. a cumulative gain of 30.8% for the S&P 500 ETF. This is an absolutely mind blowing performance. The annualized return of our short picks is -11.2%, vs. 11.8% annualized gain for the S&P 500 Index during the same period. The annual alpha of this strategy is 23 percentage points. Jim Chanos doesn’t generate this kind of performance. The best thing about this short strategy is that it provides an excellent hedge during market meltdowns. For example, in Q4 of 2018 when the S&P 500 Index lost nearly 14%, this strategy’s picks lost 25% protecting our premium subscribers from large losses.

Our newsletters are successful because we follow hedge fund managers like Brian Gustavson to identify the best and worst hedge fund stock picks. In this article we are going to take a look at 1060 Capital Management’s top stock picks for Q2 2019.

At the fifth place of 1060 Capital Management’s most valuable positions in Q2 2019 was Golden Entertainment Inc (NASDAQ:GDEN), a gaming company dealing with casinos taverns and slot routes. As for this period, a total of 11 of the hedge funds tracked by Insider Monkey were still investing in the company, 1 hedge fund less compared to the previous period. Golden Entertainment Inc ‘s largest shareholder for this period was Nantahala Capital Management holding $34.3 million worth of stock. It was followed by Indaba Capital Management, Bridger Management, and Lafitte Capital Management, leaving 1060 Capital Management as the sixth largest shareholder, amassing a stake valued at $5 million.

The fourth place in 1060 Capital Management’s portfolio in Q2 2019 was Regis Corp (NYSE:RGS), which dropped from the third place in the fund’s portfolio since the previous quarter, being cut by 25%. There were 14 hedge funds tracked by Insider Monkey fond of the stock, which is for 1 hedge fund less compared to the first quarter of 2019. Holding the largest stake in Regis Corp was Birch Run Capital, holding $176.9 million position in the stock. Renaissance Technologies and First Pacific Advisors LLC followed, while 1060 Asset Management was at the fourth place of the company’s top investors. The fund held 480,624 shares worth $7.9 million, comprising 10.4% of its portfolio.

As the fund’s third most valuable position for Q2 2019 was Churchill Downs Inc (NASDAQ:CHDN) dropping one place lower, since the managers decided to cut the position by as much as 48%. Apart from 1060 Capital Management, other 25 hedge funds were bullish on this stock, which is a decrease of 10% compared to the previous quarter. The largest shareholder was PAR Capital Management, holding a stake worth $248.1 million. Funds like Nitorum Capital, Citadel Investment Group, Millennium Management, and GAMCO Investors, also kept interest in the company.

A new addition, Penn National Gaming Inc (NASDAQ:PENN), was 1060 Asset Management’s second top stock pick for Q2 2019. The fund’s managers were optimistic about the company, which comprised 12.7% of its portfolio, worth $10.5 million. Insider Monkey tracked a total of 20 hedge funds investing in the company, a change of -33% from one quarter earlier. The company’s top shareholder was Balyasny Asset Management, holding a stake worth $21.5 million. It was followed by Citadel Investment Group, SG Capital Management, Millennium Management and 1060 Capital Management.

Finally, at the first place of 1060 Asset Management’s portfolio for Q2 2019 was Eldorado Resorts Inc (NASDAQ:ERI). The fund increased interest in the company, boosting it 16%, which is a huge change, since the position was cut by 65% during Q1 2019. A total of 37 hedge funds were bullish on this stock, which is a decrease of 15% since the previous quarter. The company’s top shareholder was HG Vora Capital Management, holding a stake worth $207.3 million. The following hedge funds were Park West Asset Management, Silver Point Capital, and Lafitte Capital Management.

Disclosure: None.