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K12 Inc. (LRN), Big 5 Sporting Goods Corporation (BGFV): Stadium Capital Was Focusing On These 5 Stocks in Q1

Editor’s Note: Related tickers: Builders FirstSource, Inc. (NASDAQ:BLDR), Insperity Inc (NYSE:NSP), Big 5 Sporting Goods Corporation (NASDAQ:BGFV), Universal Technical Institute, Inc. (NYSE:UTI), K12 Inc. (NYSE:LRN)

The top five equity holdings of Stadium Capital Management have changed little during the first quarter of 2013. Alexander Medina Seaver, the fund’s manager, has however,made a number of small tweaks to the size of the positions. Let us now take a closer look at this “fab five.”

The original 13F can be seen here. It’s important to track hedge fund sentiment, because on the whole, their best picks have been shown to outperform the market handily; discover the secrets of this strategy here.

Top dog

The top pick of Stadium capital is Builders FirstSource, Inc. (NASDAQ:BLDR), a company that manufactures and sells building products. The fund reduced its investment by 4%, and it currently holds a little over 14.3 million shares, valued at $83.8 million. The stock’s price has increased by 19% in 2013, and is currently trading just shy of $7 per share. The stock has a beta of 2.44 and trades at a forward Price to Earnings (P/E) ratio of 27.80. For the first quarter, the company beat the market expectations by posting revenues of $374.5 million and a loss of $0.07 per share.

The best of the rest

The fund increased its investment in Insperity Inc (NYSE:NSP) by 2%. The reported value of the investment in the business solutions provider is $72.5 million. The stock price is down 11% since the start of the year and is currently oscillating around the $29.5 value. Insperity Inc (NYSE:NSP)’s stock has a trailing P/E ratio of 19.23 and a forward P/E of 15.98. It pays a dividend of $0.68, representing a yield of 2.3%, and has a beta of 1.16. Analysts are rather bullish on this stock, setting a price target range of $30-$39. Four of them recommend it as a Hold and two of them recommend it as a Buy or Strong Buy.

Big 5 Sporting Goods Corporation (NASDAQ:BGFV)

Another position that has been slightly reduced is Big 5 Sporting Goods Corporation (NASDAQ:BGFV). Seaver sold more than 150,000 shares of the sporting goods retailer, with the fund’s investment valued at a little over $50 million. The stock’s price recently went into an uptrend after Big 5 Sporting Goods Corporation (NASDAQ:BGFV) posted better than expected financial results for the first quarter of 2013. Big 5 Sporting Goods Corporation (NASDAQ:BGFV) registered revenues of $246.3 million and earnings of $0.34 per share. This prompted a 29% surge to the current share price of approximately $21. For the current quarter, analysts predict the company will post Earnings Per Share (EPS) of $0.25 and revenues of $243 million. The stock has a beta of 1.79 and pays a dividend of $0.33—a yield of 1.5%.

The only investment among Stadium’s top picks that has been left unchanged is Universal Technical Institute, Inc. (NYSE:UTI). The fund owns more than 3.6 million shares, the value of which has increased by 25% to $45.5 million. The stock has a trailing P/E ratio of 56.78 and a forward P/E of 52.09. Universal Technical Institute, Inc. (NYSE:UTI) has a beta of 0.99 and pays a dividend of $0.40, which translates into a yield of 3.3%. Shares currently trade at approximately $12. Analysts have mixed feelings about the stock, as it is recommended as a Hold by four of them, while three analysts expect it to Underperform, and only one recommends to Buy;they have set a price target range of $9-$11.

Closing out the top five is K12 Inc. (NYSE:LRN). Seaver has added 2% to the fund’s investment in the education service provider, taking its holdings to a total value of $42 million. Shares have surged 33% so far in 2013, and are currently valued at approximately $28 per share. The stock is traded at a trailing P/E ratio of 39.77 with a forward P/E ratio of 29.31. In the first quarter, K12 Inc. (NYSE:LRN) delivered a profit, beating market estimates, with an EPS of $0.31 and revenues of $218 million. Wall Street is bullish on this stock, with 7 analysts recommending it as a Buy or Strong Buy, with only one recommending it as a Hold.

Final thoughts

Stadium Capital’s management seems to be bullish on education, with two of its top five positions resting in this space. We suggest investors keep an eye on K12 Inc. (NYSE:LRN) and Universal Technical Institute, Inc. (NYSE:UTI), accordingly. Builders FirstSource, Inc. (NASDAQ:BLDR) is another stock worth tracking due to positive market sentiment, along with underrated yield plays Big 5 Sporting Goods Corporation (NASDAQ:BGFV) and Insperity Inc (NYSE:NSP);continue preparing for 13F filing season here.

Disclosure: none

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