Kenneth Moffet’s Hourglass Capital Fond of Airlines, Investment Banks for Q2

Kenneth A. Moffet’s Hourglass Capital is a fund which is not currently in our database, but one whose top picks from its latest 13F filing we wanted to analyze and share with readers nonetheless. What we found is a big long-term commitment from the fund in airline stocks, with three of the world’s major air carriers: American Airlines Group Inc (NASDAQ:AAL), United Continental Holdings Inc (NYSE:UAL), and Delta Air Lines, Inc. (NYSE:DAL), being in the fund’s top seven long positions. That’s nearly unchanged from a year ago, when the same three stocks ranked in Hourglass’ top eight.

Markus Mainka/

Markus Mainka/

Founded in 1989, Moffet heads the Houston, Texas-based fund, which merged with Moffet Capital Management in 1996. The fund has assets under management and advisory of over $800 million and an equity portfolio valued at nearly $668.0 million as of the end of March. Hourglass uses a value-oriented investment style that is based on sound fundamentals. Hourglass offers its investment services to both institutions and private clients. Prior to Hourglass, Kenneth was an Executive Director with Morgan Stanley (NYSE:MS)’s Private Wealth Management Group, also in Houston.

Hourglass’ top pick remains one of those airlines, American Airlines Group Inc (NASDAQ:AAL), and it’s the sixth straight quarter this stock has ranked as the top long position in the fund’s equity portfolio. Hourglass did decrease the position by 9% during the first quarter to 665,823 shares valued at $35.14 million. However, the holding still easily ranks as the fund’s top long position, having a value more than 50% greater than its next top pick. American Airlines Group Inc (NASDAQ:AAL) has been a big winner for Hourglass since the beginning of 2014, when the airline first ranked as the fund’s top play. Shares are up over 90% since then, though they are down over 10% this year. While earnings growth has been strong, revenue growth has been less so, underperforming the industry average last quarter. With its stock already having flown high in 2014, American Airlines did not rank on our list last year of the best airlines stocks to invest in. That hasn’t stopped it from being a popular stock among funds however, with James Dondero’s Highland Capital Management owning a particularly large position.

Homebuilder D.R. Horton, Inc. (NYSE:DHI) ranks as Hourglass Capital’s second pick, moving up from fifth despite Hourglass trimming the position by 8% during the first quarter. D.R. Horton, Inc. (NYSE:DHI)’s strong returns of 12.88% during the quarter accounted for the rise in position, leaving Hourglass’ holding in the company valued at $22.05 million through its 774,198 shares. While earnings and orders have been strong for D.R. Horton, Inc. (NYSE:DHI), there are concerns that its gross margins will continue to slide as they have done the past few quarters. Crispin Odey’s Odey Asset Management was very bullish on D.R. Horton entering 2015, owning a position of over 15.49 million shares and with exposure of just over 12% to the stock, its top pick.