Michael Karsch’s Top Stock Picks Include AIG

Michael Karsch, manager of Karsch Capital Management, has quite the pedigree. After working at hedge fund Chieftain Capital– which in turn was after he had graduated from Harvard Business School- he served as an analyst at Soros Fund Management where he got to work with Soros himself as well as fellow billionaire Stanley Druckenmiller.

Compared to other investors, Karsch puts less emphasis on company specifics such as the valuation and recent financial performance in favor of industry trends. This often leads the fund to invest in broad investment themes, with multiple stocks in one industry or even multiple stocks in multiple industries which benefit from the same trend. Since the investment process begins with where the industry is going and then moves towards the company’s valuation, analysts often form multiple top-down possible outcomes; if the general finding is that the current stock price is below the company’s value in many of the likely scenarios, Karsch would consider the stock a buy.

Karsch’s 13F filing shows that the fund is a fairly active manager; of its ten largest single-stock holdings at the end of September, four were in stocks that it hadn’t owned at all three months earlier. So in this case it is particularly important for investors to check on the individual stocks, as they may not be at the top of Karsch’s portfolio anymore– or he may have doubled his stake, as he did with his top pick. See the full list of his stock picks and read on for what we think of Karsch’s five largest holdings:

The fund’s top pick was Tyco International Ltd. (NYSE:TYC), which was the second largest holding at the beginning of July before Karsch increased its stake further to 5.1 million shares. Following its spinout of some other businesses, Tyco should now be a more focused security and fire protection systems company. It currently trades at 14 times consensus earnings for the fiscal year ending in September 2014. Billionaire Ken Griffin’s Citadel Investment Group was also buying the stock in the third quarter (find more of Griffin’s stock picks).