With over $1.1 billion in its equity portfolio alone, Bryn Mawr Capital is a hedge fund with a clear preference for financial stocks, currently more than half of its holdings’ worth. Not surprisingly, three of the top five stocks in Bryn Mawr Capital’s equity portfolio come from the banking or insurance sector, and because it can be rewarding to track hedge fund sentiment, let’s take a look at the hedgie’s top five positions.
On top is ProAssurance Corporation (NYSE:PRA), an insurance holding company in the business of professional liability insurance for the healthcare industry. The stock has had a terrific run so far this year after splitting at the start of 2013, currently trading just off a record high of $47.92. But since releasing fourth quarter earnings, shares haven’t made much headway through the $47.50 to $47.70 level. Although revenue was up slightly, net income dropped 4% due to the corresponding increase in the cost of sales by 5%. The longer-term outlook for ProAssurance Corporation (NYSE:PRA), is bullish as analysts recommend a buy, on average.
At number two is Mondelez International Inc (NASDAQ:MDLZ), formally known as Kraft Foods Inc. This is a recent addition to the Bryn Mawr portfolio at 1.5 million shares, and appears to have been more of a momentum play, as Q4 earnings were less than stellar. When Kraft announced it would split in two between global snacking and domestic grocery, Mondelez International Inc (NASDAQ:MDLZ) clearly got the better half. Globally, Mondelez International Inc (NASDAQ:MDLZ) controls 30% of the gum market, 15% of chocolate and 7% of the global candy market. It also owns such coveted brands such as Oreo and Chips Ahoy, as well as nearly 20% of the biscuit market. The stock has pushed through resistance at $30.50, and is trading at a new high near the $30.61 mark.
Coming in at number three is U.S. Bancorp (NYSE:USB), another financial stock for Bryn Mawr. Since the start of the year, trading has been very choppy, and is probably in sympathy to trading in the broader markets, as US Bancorp’s beta of 1.3 suggests a slightly more volatile stock. U.S. Bancorp (NYSE:USB), however, is a very solid name in the banking sector. Thanks to conservative loan underwriting, strategic acquisitions and strong management, US Bancorp emerged from the financial crisis largely unscathed.
Fourth of this top five is The Coca-Cola Company (NYSE:KO), another new addition according to the latest 13F filing. Although Coca-Cola Company (NYSE:KO) continues to be dogged by competition from PepsiCo, Inc. (NYSE:PEP) in the carbonated beverage market, Coca-Cola Company (NYSE:KO)’s extensive market reach and global brand recognition makes it to consumer goods what NIKE, Inc. (NYSE:NKE) is to athletic wear. But why would Bryn Mawr add Coke shares to its portfolio now? Could it have been because a NY State Supreme Court Judge in NY overturned Bloomberg’s ban on the sale of soda more than 16oz? Perhaps, but more likely, it’s because Coca-Cola Company (NYSE:KO)’s stock has been posting consistent revenue and earnings growth. The company’s most recent earnings report shows that Coca-Cola Company (NYSE:KO)’s bottom line has improved 4% to $9 billion.
And finally, there is Everest Re Group Ltd (NYSE:RE). The stock had a very strong start to 2013 after strong 2Q 2012 earnings, but has since leveled off at $130.60 after unimpressive 4Q earnings. The reinsurer has been undermined by market pressure on insurers from 2012 storms as well as an 8% drop in new premiums. Further technical pressure is causing the stock to move into a new trading range at $122-$125. Since adding Everest Re Group Ltd (NYSE:RE) during the third quarter of last year, Bryn Mawr has increased its position by 777%.
There is certainly some consistency to the choices made by the fund managers at Bryn Mawr Capital Management, focusing on the financial sector and consumer goods. Looking at the remaining positions in the fund, we can see that it is clearly focused on banking and insurance stocks as well as companies such as Philip Morris International Inc. (NYSE:PM), Hershey Co (NYSE:HSY), and Hillshire Brands Co (NYSE:HSH). This sector-investing strategy can be somewhat myopic, but Bryn Mawr has found some gems within these markets. See the rest of the fund’s stock picks here.
Disclosure: none
