Hedge Fund Managers Paul Cantor, Joseph Weiss, and Will Wurm’s Top Picks

Paul Cantor, Joseph Weiss, and Will Wurm‘s Beech Hill Partners has filed its latest 13F with the SEC, giving us a chance to see the fund’s holdings as of the end of March. The New York-based hedge fund, which is open only to accredited investors, was founded in 1987 and maintains a balanced and diverse equity portfolio with an inclination towards the health, technology, and finance sectors, which accounted for over 60% of its exposure to equities. As stated in the fund’s Q1 2015 letter to investors, it exited the majority of its positions in oil and gas companies during the quarter, due to continued weakness in oil prices. Among those closed positions was Seadrill Ltd (NYSE:SDRL), though the fund maintains its position in Exxon Mobil Corporation (NYSE:XOM), which Warren Buffett notably closed recently.

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Hedge funds like Beech Hill Partners prefer to have the largest amounts of their capital invested in large and mega-cap stocks because these companies allow for much greater capital allocation, which is important taking into account that the global hedge fund industry has swollen to nearly $3.0 trillion. That’s why if we take a look at the most popular stocks among funds (we track more than 700 in our database), we won’t find any mid- or small-cap stocks there. However, our backtests of hedge funds’ equity portfolios between 1999 and 2012 revealed that the 50 most popular stocks among hedge funds underperformed the market by 7 basis points per month. On the other hand, we found that we can combine the pricing inefficiencies among small-cap picks with hedge fund expertise and obtain significant results. This was confirmed through backtesting and in forward tests of our small-cap strategy since 2012. The strategy, which involves imitating the 15 most popular small-cap picks among hedge funds managed to provide gains of more than 137%, beating the broader market by over 82 percentage points through the end of March (see the details).

Apple Inc. (NASDAQ:AAPLremains at the top of Beech Hill’s equity portfolio, with the fund’s exposure to the stock increasing to 6.00%, giving it nearly 50% greater exposure to Apple, which owns one of the most profitable businesses ever, than to any other individual stock. Its position was valued at $12.76 million at the end of March and consisted of 102,527 shares, up slightly by 1% during the first quarter. Apple Inc. (NASDAQ:AAPL) also returned more than 13% during the quarter. However despite another record setting quarterly performance announced in late April, Apple was up only marginally, less than 1%, in April. Some analysts fear growth will slow now that the iPhone 6 has hit on perhaps the last major design trick in its arsenal, a bigger screen. The company’s excessive borrowing to appease shareholders like Carl Icahn, who has actively pressured it for greater shareholder returns, is also rubbing some analysts the wrong way. While Apple has nearly $200 billion in cash, most of it is held overseas for tax purposes and can’t be directly accessed, so Apple actually has to borrow money to fund its share buybacks. Regardless, bulls see Apple Inc. (NASDAQ:AAPL) as the likely first trillion dollar company, and there is nearly unlimited potential for what it can do with its overseas cash hoard.

Facebook Inc (NASDAQ:FB) checked in at second place in Beech Hill’s equity portfolio, with the fund inching its position in the social media giant by 2% during Q1 to 108,808 shares, which had a value $8.95 million at the close of Q1. Shares enjoyed a solid first quarter, returning over 5%, but dipped in late April following the release of Facebook Inc (NASDAQ:FB)’s first quarter results. Sales and revenue came in essentially right at estimates, while margins have dropped from the year-ago period. However, Facebook Inc (NASDAQ:FB) has a number of hot properties going forward beyond just its main social media site, including the Oculus Rift VR headset, Instagram and WhatsApp. Billionaire Stephen Mandel’s Lone Pine Capital had the largest position in Facebook at the end of 2014, among funds in our database.

Express Scripts Holding Company (NASDAQ:ESRX), a $63 billion pharmacy benefit management services company was another top pick of Beech Hill’s, landing in third. The position was decreased by 1% to 79,590 shares during the first quarter, those shares holding a value of $6.91 million. Express Scripts Holding Company (NASDAQ:ESRX) returned a modest 2.48% during Q1 and was down slightly in April. However a positive earnings report and the news today that the company could be a player for  Omnicare, Inc. (NYSE:OCR), a pharmaceuticals provider, give Express’ stock a lot of potential heading into May. Express Scripts Holding Company (NASDAQ:ESRX) does have a number of very bullish investors, including John Shapiro’s Chieftain Capital, which had greater than 16% exposure to the stock in his equity portfolio at the end of 2014, with it being his top pick. Three other investors in our database also had exposure greater than 10%.

Beech Hill has positions in both Google Inc (NASDAQ:GOOG)’s Class A and Class C shares. Its position in Google’s Class A shares (GOOGL) amounted to 12,002 shares, down by 1% during the first quarter, that position having a value of $6.66 million. Those Class A shares gained 4.53% during Q1, but were down 1% in April after Google Inc (NASDAQ:GOOG)’s quarterly results missed estimates (though shares initially spiked following the earnings release). Google Inc (NASDAQ:GOOG) has been mentioned as a potential suitor for both Tesla Motors Inc (NASDAQ:TSLA) and Twitter Inc (NYSE:TWTR) recently, with the latter the more likely of the two given the potential of the platform and its management’s struggles. Billionaires Ken Fisher and Andreas Halvorsen are among the other top investors with position in both Google’s Class A and Class C shares.

Yum! Brands, Inc. (NYSE:YUM) was one of the most popular restaurant stocks among the funds in our database heading into 2015, and Beech Hill was one of the 38 funds bullish on it. Yum! Brands offered up a tasty financial treat for those investors in the first quarter, returning 8.67%. While Beech Hill inched its position downwards by 2% to 84,012 shares, it was still the fund’s fifth-most valuable position at $6.61 million. Though Yum! Brands, Inc. (NYSE:YUM) missed on revenue expectations during its most recent earnings report due partly to weakness in China, where its operations have endured some controversy, it did beat earnings estimates, which contributed to an even stronger April for the stock, as it’s shot up by another 9.2%. Billionaires George Soros and Steven Cohen were among the other investors of Yum! Brands, Inc. (NYSE:YUM), both wisely initiating their positions just before the start of the year.

Disclosure: None