Avenue Capital Group is a hedge fund headquartered in New York, managed by Marc Lasry, who also co-founded it with Sonia E. Gardner in 1995. As of the end of March, avenue holds an equity portfolio of approximately $976 million. A total of 80% of the fund’s equity portfolio is invested in consumer discretionary, transports and finance sectors. According to the recent 13F filing submitted to the SEC, among Marc Lasry’s top small cap picks are Houghton Mifflin Harcourt Co (NASDAQ:HMHC), Meritor Inc. (NYSE:MTOR), Dynegy Inc. New (NYSE:DYN) and Scorpio Tankers Inc (NYSE:STNG).
A reader might question our decision to focus on the small-cap category, considering that its mostly the larger counterparts of these companies that head the portfolios of most hedge funds. The reason for our focus is simple. Our research has shown that in the period between 1999 and 2012 the top small-cap picks of hedge funds outperformed the broader market by nearly one percentage point per month, whereas the top overall picks (mostly large-caps) underperformed by seven basis points per month during the same period. Why pay high fees to own a glut of low-performing stocks when you can invest on your own in hedge funds’ best stock picks? Since its launch in August 2012, Insider Monkey’s small-cap strategy has outperformed the S&P 500 every year, returning over 142% since then, nearly 2.5 times greater than the S&P 500′s returns (find more details).
According to the latest 13F filing, Avenue Capital Group owns 5.74 million shares of Houghton Mifflin Harcourt Co (NASDAQ:HMHC). The stake represents 13.81% of the fund’s equity portfolio and is valued at $134.73 million. Houghton Mifflin Harcourt Company is a worldwide provider of educational content, technology, services and media, operating on both education and trade publishing segments. The company with a market cap of $3.76 billion has revealed that during the first quarter of 2015 its net loss has increased to $160 million from $146 million a year ago. However, the revenue appreciated to $163.00 million from $154 million. John Paulson’s Paulson & Co and Anchorage Advisors, managed by Kevin Michael Ulrich and Anthony Davis also have stakes in Houghton Mifflin Harcourt Co (NASDAQ:HMHC), which contain 30.91 million shares and 21.39 million shares respectively.
During the first quarter, Marc Lasry reduced its stake in Meritor Inc. (NYSE:MTOR) by 600,000 shares to 7.21 million shares, worth $91 million. Meritor is a global producer of axles, undercarriages, drivelines, brakes and braking systems for medium- and heavy-duty truck OEMs, specialty vehicle manufacturers, aftermarkets, and trailer producers. The company has a market cap of $1.41 billion and a P/E ratio of 4.27 significantly below the industry average of 20.6. Among the funds we track, Larry Robbins’ Glenview Capital has the biggest stake in in Meritor Inc. (NYSE:MTOR) with some 7.52 million shares worth $94.79 million as of the end of March.
Marc Lasry also trimmed its stake in Dynegy Inc. New (NYSE:DYN) by 21% on the quarter to around 2.07 million shares, valued at $65 million. Meanwhile, the stock has gained almost 11% since the beginning of the year amid a first-quarter net loss referable of $180 million, compared to a loss of $41 million for the first quarter of 2014 and revenue of $632 million, down from $762 million a year earlier. Other shareholders of Dynegy Inc. New (NYSE:DYN) are Howard Marks’ Oaktree Capital Management, Israel Englander’s Millennium Management and Luminus Management, run by Jonathan Barrett and Paul Segal.
As of the end of the first quarter, Avenue Capital held 6.41 million shares of Scorpio Tankers Inc. (NYSE:STNG), valued at $60.35 million. Scorpio Tankers Inc. (NYSE:STNG) is a $1.66 billion company that provides seaborne transportation of refined petroleum products and crude oil. According to the earnings release, the company has recorded a 109.4% year-over-year increase in revenues to $160.71 million for the first quarter and EPS of $0.25, down from $0.28 a year earlier. At the end of May, Scorpio Tankers announced a new securities buyback program to purchase up to an aggregate of $250 million of the common stock and bonds. Among the funds we track, James Dinan’s York Capital Management has the biggest position in Scorpio Tankers Inc. (NYSE:STNG) amounting 14.81 million shares, followed by Mariko Gordon’s Daruma Asset Management with 7.74 million shares.