International Speedway Corporation (NASDAQ:ISCA) reported its earnings this morning for its fiscal second quarter of 2015, which ended May 31. The company posted earnings of $13.4 million, or $0.29 per share, down from $21.5 million, or $0.46 per share, in the year-ago quarter. Revenues declined to $164.0 million from $190.3 million in the same quarter last year. Adjusted earnings was reported to be $16.5 million, or $0.35 per share, still lower than the consensus $0.40 EPS, according to data from Thomson Reuters. According to the motorsports entertainment firm, it expects its full fiscal year 2015 to yield earnings of $1.20 to $1.30 per share on revenues of $625 million to $635 million. Year-to-date, the stock has risen by over 8%, however the bleak earnings report has sent shares crashing into a tire wall, down by over 7% in morning trading. Does this present a good opportunity for investors to buy into the stock, or should it be considered a warning sign to stay away?
Hedge fund managers seemed to have put their faith in International Speedway Corporation (NASDAQ:ISCA)’s share price rising based on the increased interest in the stock by the top money managers. On March 31, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, up 33% from the end of the fourth quarter. The value of hedge funds’ holdings also increased by 10.98% to $271.62 million by the end of the first quarter, a notable increase given the stock’s price only appreciated by 3.03% in the first three months of the year. And while the earnings report today doesn’t necessarily bode well for the company, shares appreciated strongly in the second quarter, up by more than 10%, showing that hedge funds weren’t wrong in their thinking heading into that quarter. Whether they predicted the latest sales and moved out of the stock during the second quarter, we don’t know yet.
At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, Our small-cap strategy’s picks outperformed the market by 80 percentage points between September 2012 and the end of June 2015. The small-cap strategy returned 135.3% during these 34 months, vs. 55% gain for SPY (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 135% and beating the market by more than 80 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks like International Speedway Corporation (NASDAQ:ISCA) utilizing hedge fund expertise rather than large-cap stocks.
Insider Monkey also looks at purchases or sales of shares by insiders of companies to measure whether insiders are confident about their firm’s stock. In the case of International Speedway Corporation, there were no significant share purchases, save for what appears to be the regular vesting options of large shareholders. In terms of sales, COO John Saunders sold 2,900 shares on April 10.
Keeping this in mind, we’re going to review on the next page the detailed hedge fund action regarding International Speedway Corporation.
Hedge fund activity in International Speedway Corporation (NASDAQ:ISCA)
When looking at the hedgies followed by Insider Monkey, Covalent Capital Partners, managed by Robert Hockett, holds the number one position in the company. Covalent Capital Partners has a $16.6 million position in the stock comprised of 507,780 shares, which makes up 3.4% of its 13F portfolio. The second-largest stake is held by Zeke Ashton of Centaur Capital Partners, consisting of 180,000 shares worth $5.9 million. The fund has 8.2% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish include Steve Pei’s Gratia Capital, David E. Shaw’s D.E. Shaw & Co., L.P., and Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital.
As aggregate interest increased, some big names were leading the bulls’ herd. Gratia Capital, managed by Steve Pei, assembled the most outsized position in International Speedway Corporation (NASDAQ:ISCA). Gratia Capital had $5.4 million invested through opening a position of 167,058 shares of the company by the end of the first quarter. Geoffrey Raynor’s Q Investments (Specter Holdings) also initiated a $3.4 million position of 103,572 shares during the quarter. The other funds with new positions in the stock are Brian Taylor’s Pine River Capital Management, Jim Simons’ Renaissance Technologies, and Matthew Tewksbury’s Stevens Capital Management.
International Speedway Corporation (NASDAQ:ISCA) appears to be a solid stock to buy on the dip at the moment, based on the interest smart money has shown in the stock, with the caveat being that the latest earnings report may not have been what they were expecting of the company.
Disclosure: None
