Managed by Eric Edidin and Josh Lobel, Archer Capital currently has at least $625 million in its equity portfolio, according to its most recent 13F filing with the SEC. This marked an increase from $339 million the prior quarter. Furthermore, the top five stocks in Archer’s equity portfolio currently make up 25% of total holdings, and it’s worth noting that generally speaking, the fund has a penchant for services and consumer goods stocks. See Edidin and Lobel’s profile here, but the point is this: it can pay off big to piggyback the smart money.
At Insider Monkey, we track 450 of the world’s most elite hedge fund managers and our research has shown that over time, their picks routinely outperform. For more than a decade in our back tests, hedge funds’ consensus small cap picks beat the market by 18 percentage points a year; learn more about this research here.
Furthermore, it’s also crucial to look at each of the funds we track individually, and by using the latest round of fourth quarter 13F data from the SEC, we can determine how these funds were preparing for 2013. Let’s take a look at Archer Capital.
Coming in at number one is Macquarie Infrastructure Company LLC (NYSE:MIC). Currently near $54 per share, the stock is trading at its high for the year, but could come under profit-taking pressure at this level. Fundamentally, there are additional reasons why this stock is faltering. Macquarie Infrastructure Company LLC (NYSE:MIC)’s latest earnings report indicated a rather dramatic drop in net income (52%) from 2011, with a corresponding decline in EPS to $0.29. The stock is currently trading at 185 times trailing earnings versus a sector average of 30.0x, so it’s easy to see that this hedgie is focused on momentum—at least with Macquarie Infrastructure Company LLC (NYSE:MIC).
Moving on, at number two is Lear Corporation (NYSE:LEA), which supplies automotive seat systems as well as electrical distribution systems. The company, with a market cap of $5.3 billion, recently posted better-than-expected earnings, and has avoided a proxy fight with “activist investors” by agreeing to increase its share buyback program. Unfortunately, Lear Corporation (NYSE:LEA)’s stock price has been stuck in a sideways trend since early February at the $54 to $56 level. Once the stock can sustain a challenge to $55.80, a move to $62 should be unobstructed. Compared to its closest competitors, Johnson Controls, Inc. (NYSE:JCI) and Delphi Automotive PLC (NYSE:DLPH), Lear trades at 1.5 times book value, an average discount of over 60% to these peers.