Patrick Industries, Inc. (PATK), Citigroup Inc. (C) & More: Is Tontine Asset Management Right to Bet on These Companies?

There were 659 hedge funds in our system whose 13F portfolios on June 30 consisted of at least five long positions in billion-dollar companies. Of those 659 funds, an impressive 627 of them delivered positive returns during the third-quarter from their long positions in those stocks, based on the size of those positions on June 30. All told, their long picks in billion-dollar companies averaged 8.3% returns for the quarter, well above the S&P 500 ETFs’ 3.3% figure. Nonetheless, hedge funds continue to disappoint their investors for the most part, as redemptions have hit the industry hard of late. That can be chalked up to their high fees and the underperformance on the short-side of their portfolios, which provide downside protection but have dragged down overall returns.

Having said that, in this article, we are going to take a look at four equity picks included in the equity portfolio of Jeffrey Gendell‘s Tontine Asset Management, including Patrick Industries, Inc. (NASDAQ:PATK), Citigroup Inc. (NYSE:C), LSB Industries, Inc. (NYSE:LXU), and Bank of America Corp (NYSE:BAC).

Tontine Asset Management is a Connecticut-based investment advisory firm, managed by Jeffrey Gendell, macro investor. The fund’s equity portfolio was valued at $676.29 million at the end of September, up from $488.25 million a quarter earlier. When counting the fund’s 12 long positions in stocks that had a market cap of at least 1$ billion on June 30, the fund’s weighted return amounted to 16.54%, based on the size of those holdings at the end of the second quarter. Even though our calculations of returns are different from the actual returns, be we don’t count short positions and some other instruments,  they still offer a way for analyzing the fund’s investment moves.

Let’s begin with Patrick Industries, Inc. (NASDAQ:PATK), a manufacturer of component products for manufactured housing industries and recreational vehicles. During the third quarter, Tontine Asset Management lowered its stake in the company by 16% to 1.06 million shares worth $65.42 million. Year-to-date, the stock advanced by 50%, while during the third quarter it inched up by 2.7%. Heading into the third quarter of 2016, a total of 19 funds tracked by Insider Monkey were long this stock, a change of 27% from the first quarter of 2016. Following Tontine, which was the largest shareholder, Steamboat Capital Partners, managed by Parsa Kiai, held a $12.8 million position in Patrick Industries, Inc. (NASDAQ:PATK) at the end of June. Some other peers that were bullish encompassed Robert B. Gillam’s McKinley Capital Management, Richard Driehaus’s Driehaus Capital and Brandon Osten’s Venator Capital Management.

On the other hand, in Citigroup Inc. (NYSE:C), Tontine raised its stake twice in the second and third quarter, by 55% and 34%, respectively. In this way, the fund held 537,710 shares worth $25.40 million at the end of September, following an 11.8% gain registered by the stock in the third quarter. Overall, the number of funds from our database long Citigroup inched down by 4% to 97 during the second quarter. Among them Eagle Capital Management held the most valuable stake in Citigroup Inc. (NYSE:C), which was worth $1.14 billion at the end of the second quarter. On the second spot was First Pacific Advisors LLC which amassed $621 million worth of shares. Moreover, Hound Partners, Fisher Asset Management, and Greenhaven Associates were also bullish on Citigroup Inc. (NYSE:C).

In LSB Industries, Inc. (NYSE:LXU), whose stock lost 29% during the third quarter, Tontine increased its stake by 10% over the quarter to 1.39 million shares worth $11.95 million held at the end of September. Nine funds tracked by us held shares of LSB Industries at the end of June, down by 31% over the quarter. One of the biggest positions in LSB Industries, Inc. (NYSE:LXU) was held by Horizon Asset Management, which amassed a stake valued at $9.3 million at the end of June and followed Tontine, which was the top shareholder. Indaba Capital Management, Sabal Capital Management, and SkyTop Capital Management also held valuable positions in the company.

After having increased its stake in Bank of America Corp (NYSE:BAC) by 48% during the second quarter, the fund further boosted it by 78% in the following three months as the stock gained 18.5%. In its latest 13F, Tontine disclosed a $29.44 million stake in the company, which contained 1.88 million shares. A total of 102 of the hedge funds tracked by Insider Monkey were long Bank of America heading into the third quarter, down by 7% from the end of March. The largest stake in Bank of America Corp (NYSE:BAC) was held by Fisher Asset Management, which reported holding $571.5 million worth of stock as of the end of June. It was followed by Eagle Capital Management with a $448 million position. Other investors bullish on the company included First Pacific Advisors LLC, Pzena Investment Management, and D E Shaw.

Disclosure: None