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Pleasant Lake Keeps Buying As Magnachip Semiconductor Corp (MX) Keeps Rising

According to a recent 13D filing with the Securities and Exchange Commission, Jonathan Lennon‘s Pleasant Lake Partners has increased its activist stake in Magnachip Semiconductor Corp (NYSE:MX), as it acquired some 923,800 shares through its affiliated funds to lift its total stake to 2.64 million shares. The holding represents 7.7% of the $308.46 million South Korea-based manufacturer of semiconductor products’ outstanding common stock.



Why are we interested in the 13F filings of a select group of hedge funds? We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole; yet investors have been stuck (until now) investing in all of a hedge fund’s stocks: the good, the bad, and the ugly. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic the best ideas of the best fund managers on your own? These top small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Even better, since the beginning of forward testing at the end of August 2012, the strategy worked just as our research predicted and then some, outperforming the market every year and returning 142% over the last 33 months, which is more than 84 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).

Before Jonathan Lennon launched his own fund, he used to be an investment analyst at JAT Capital. Prior to that he was a financial analyst in the Investment Banking Division at Goldman Sachs. The market value of Pleasant Lake’s public equity portfolio stood at $109.61 million at the end of March, and the consumer discretionary sector accounted for 72% of those holdings. The top equity picks included Famous Dave’s of America, Inc. (NASDAQ:DAVE), Hemisphere Media Group Inc (NASDAQ:HMTV), and Houghton Mifflin Harcourt Co (NASDAQ:HMHC).

Pleasant Lake has been boosting its stake in Magnachip Semiconductor Corp (NYSE:MX) since April 8 through a number of open market purchases. The price per share of transactions has ranged from $5.06 to $7.80. The fund initiated a position in the company during the last quarter of 2014. So far this year, Magnachip Semiconductor Corp (NYSE:MX)’s stock has slumped by over 40%. On the other hand, the semiconductors industry has posted gains of nearly 8% during the same period as it rebounds from a poor 2014. A major part of this fall came in February when the company released its restated financial results for 2011-2013. However, things are looking more upbeat for Magnachip Semiconductor Corp (NYSE:MX) as it beat expectations in its financial results for the first quarter of 2015. This followed an upgrade by Topeka Capital Markets to ‘Buy’ with a price target of $9 from an earlier ‘Hold’ rating.

YJ Kim, Magnachip Semiconductor Corp (NYSE:MX)’s interim CEO has now taken on the position permanently and he has drawn attention to the company’s comprehensive cost and portfolio optimization program, under which it has now combined its Power Solutions and Display Solutions operations into a single Standard Products unit. Among over 700 hedge funds that we track, the interest in Magnachip Semiconductor Corp (NYSE:MX) has considerably decreased over the first quarter as only 16 firms had an aggregate investment of $67.46 million in the company at the end of March compared to 24 funds with $203.36 million at the end of the previous quarter. Within our database, Marc Lasry‘s Avenue Capital is the largest stockholder of Magnachip Semiconductor Corp (NYSE:MX) with some 4.09 million shares valued at $22.37 million.

Moving on to Pleasant Lake’s top picks, its largest holding, Famous Dave’s of America, Inc. (NASDAQ:DAVE), remained unchanged during the first quarter at 923,400 shares valued at $26.32 million. The holding represents 12.93% of the company’s outstanding stock and 24.01% of the fund’s portfolio value. The stock of the $150.22 million developer of franchise restaurants has slumped by more than 18% year-to-date. After Pleasant Lake, Stephen V. Raneri‘s Lioneye Capital Management is the largest stockholder of Famous Dave’s of America, Inc. (NASDAQ:DAVE) owning 831,700 shares valued at $23.70 million.

Following an increase of 4% during the first quarter, Pleasant Lake’s stake in Hemisphere Media Group Inc (NASDAQ:HMTV) was comprised of 1.30 million shares valued at $16.47 million. The Spanish-language media company serving U.S. Hispanic and Latin American markets has been another disappointment so far this year, as its stock has declined by nearly 8% during this period. Christian Leone‘s Luxor Capital Group is the largest stockholder of Hemisphere Media Group Inc (NASDAQ:HMTV), holding about 5.13 million shares valued at $64.87 million.

The fund’s third-largest holding, Houghton Mifflin Harcourt Co (NASDAQ:HMHC), saw an increase of 63% during the first quarter, taking the total stake to 485,800 shares valued at $11.41 million. The provider of education solutions has helped Pleasant Lake’s needle tick in the right direction as it has posted gains of more than 28% year-to-date. Recently, Houghton Mifflin Harcourt Co (NASDAQ:HMHC) bought the EdTech business unit of Scholastic (NASDAQ:SCHL) for $575 million. John Paulson, who has recently been in the news on account of his magnanimous donation to Harvard University, is the largest stockholder of Houghton Mifflin Harcourt Co (NASDAQ:HMHC) as his fund owns some 30.91 million shares valued at $725.83 million.

Disclosure: None

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