Leon Lowenstein’s Lionstone Capital Management is a medium-sized hedge fund with over $400 million in regulatory assets under management. The fund’s latest 13F filing revealed an equity portfolio valued at $204.55 million that contains 14 long positions in companies, mainly from the Consumer Discretionary and Financial sectors, followed by Industrials and Technology stocks. Overall, the fund disclosed 12 long stakes in companies with a market capitalization of over $1.0 billion, with those positions posting weighted average returns of 12.4% in the first three months of 2015.
Lionstone Capital is one of more than 700 hedge funds that we track at Insider Monkey as part of our small-cap strategy. During the last 2.5 years, since August 2012, our small-cap strategy registered a return of 132.0%, compared to the S&P 500 ETF (SPY)’s 52.6% return for the same period. By analyzing 13F filings, one can identify the most popular stocks among hedge funds. However, our backtests showed that a portfolio consisting of the 50 most popular stocks among hedge funds (which are mostly large-cap companies) under-performed the market by around 7.0 basis points per month. On the other hand, a portfolio of the 15 most popular small-cap stocks managed to beat the market by nearly 1.0 percentage point per month (read more details about our backtests here).
One of the main factors influencing Lionstone’s gains during the first quarter was the outstanding gains posted by the companies representing its top positions, with three stocks showing double-digit growth. On the first spot is MDC Partners Inc (NASDAQ:MDCA), in which Lionstone owns 1.19 million shares, valued at $27.03 million as of the end of 2014. MDC Partners Inc (NASDAQ:MDCA)’s stock advanced by 25.78% in the first three months of 2015, amid the company posting a revenue of $1.22 billion for 2014, versus $1.15 billion a year earlier. Moreover, the net loss narrowed to $0.49 per share from $3.16 in 2013. Among the largest shareholders of MDC Partners is Richard Barrera’s Roystone Capital Partners, which holds 3.1 million shares of MDC Partners Inc (NASDAQ:MDCA), representing only 2.8% of its equity portfolio, and Amy Minella with Cardinal Capital, whose stake is 2.4 million shares.
The stock of FirstService Corp (NASDAQ:FSRV) had the highest growth among the lot, jumping by 27.45% during the first quarter, with 437,000 shares held by Lionstone Capital, comprising a market value of $22.3 million. Both the resurrection of the real estate market and therefore the appreciation of its operating income at the end of 2014, made it possible for FirstService Corp (NASDAQ:FSRV) to turn to a profit of $43 million in 2014 from a loss of $21 million a year earlier. The two largest stockholders of FirstService Corp (NASDAQ:FSRV) in our database as of the end of 2014 are Matthew A. Weatherbie’s Weatherbie Capital with 462,900 shares, and Jim Simons’ Renaissance Technologies with 461,500 shares.
Leon Lowenstein’s stake in Apple Inc. (NASDAQ:AAPL) remained unchanged, comprising almost 161,800 shares valued at $17.9 million. Apple Inc. (NASDAQ:AAPL)’s recent launch of the new Watch appears to herald the eventual market dominance of the product and reinforces Apple’s rather strong ‘Buy’ ratings among analysts. Activist Carl Icahn’s Icahn Capital LP holds by far the leading position as a shareholder of Apple Inc. (NASDAQ:AAPL) in our database, with 52.8 million shares worth $5.82 billion as of the end of 2014.
The stocks of the other two companies from Lowenstein’s equity portfolio had more modest returns during the first quarter, posting single-digit growth. Lowe’s Companies, Inc. (NYSE:LOW)‘s stock gained 8.50% during the first quarter, which Lionstone reported holding 255,700 shares of, valued at $17.59 million in the previous round of 13F filings. Last month, two analysts, Oppenheimer and Telsey Advisory Group boosted their price targets on Lowe’s Companies, Inc. (NYSE:LOW) to $85 and $82 per share, respectively, with ‘Outperform’ ratings. Edgar Wachenheim’s Greenhaven Associates and Ken Griffin‘s Citadel Investment Group are among the largest shareholders of Lowe’s Companies, Inc. (NYSE:LOW) among the funds that we track, with Greenhaven holding 11.25 million shares and Citadel boosting its stake by 72% during the fourth quarter to 3.75 million shares.
In Fidelity National Financial Inc (NYSE:FNF), Lionstone reported ownership of 492,200 shares, worth $16.96 million. The stock of the insurance company has had a strong run since October, and gained another 7.30% during the first three months of 2015. Fidelity National Financial Inc (NYSE:FNF) is one of the top three picks of activist Keith Meister of Corvex Capital, alongside 44 other investors that disclosed long positions as of the end of 2014. In addition, four billionaires among those that we track are also bullish on Fidelity National Financial Inc (NYSE:FNF), among which Larry Robbins and Daniel S. Och own the largest stakes.