Silver Arrow Partners, L.P., a New York-based hedge fund led by Raji Khabbaz, has just issued its latest quarterly letter to investors. According to the information contained within it, the fund has returned 1.04% during the second quarter of 2015. The interesting thing about the returns is that the short bets of Silver Arrow generated 111 basis points (1.11%), while the long positions returned less than half of that, a mere 50 basis points (0.50%). At the same time, the total amount of capital invested in the long ideas of the fund equaled 88.6% by the end of June, while only 26.5% of available capital was allocated towards short selling. As you can see, the performance of short positions of Arrow Capital turned out to be much more effective on a “per unit of capital” basis; therefore, in this article we would like to draw your attention to the top five bearish bets of the firm, which are in Coach Inc (NYSE:COH), Continental Resources Inc (NYSE:CLR), Nucor Corporation (NYSE:NUE), Urban Outfitters Inc (NASDAQ:URBN) and Oracle Corporation (NYSE:ORCL).
The fund’s letter had this to say about its short positions and philosophy when it comes to shorting stocks: “At the end of the quarter, the short portfolio consisted of 16 individually shorted companies, with an average position size of 1.7% of capital. Our shorts have smaller average position sizes than our long investments by design. A higher degree of diversification on the short side helps us manage and contain certain risks unique to short selling, specifically the possibility that the ability to borrow shares to short may rapidly decline, thus increasing the likelihood of a “short squeeze” or imposition of egregious short borrowing rates.”
We don’t just track the latest moves of funds and stocks at Insider Monkey. We are, in fact, more interested in their 13F filings, which we use to determine the top 15 small-cap stocks held by the funds we track. We gather and share this information based on 16 years of research, with backtests for the period between 1999 and 2012 and forward testing for the last 2.5 years. The results of our analysis show that these 15 most popular small-cap picks have a great potential to outperform the market, beating the S&P 500 Total Return Index by nearly one percentage point per month in backtests. Moreover, since the beginning of forward testing in August 2012, the strategy worked brilliantly, outperforming the market every year and returning 139%, which is more than 80 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).
Coach Inc (NYSE:COH) is an $8.54 billion market cap luxury accessories and lifestyle collections provider. Over the second quarter of the year, Silver Arrow was generally right about the downward direction of the stock price, as it slipped by 16.47% on lower store count and exchange rate swings. According to the latest 13F filings, Ariel Investments, led by John W. Rogers, slashed its position in Coach Inc (NYSE:COH) by 31%. After those adjustments, the fund held 1.01 million shares worth $42 million.
The next on the list is the crude oil and natural gas explorer, Continental Resources Inc (NYSE:CLR). The stock mostly traded sideways from April to June, and closed the quarter down by 2.9%, generally following the dynamics of oil prices. Ken Griffin’s Citadel Investment Group headed the list of investors with long position in the stock of Continental Resources Inc (NYSE:CLR), holding 1.08 million shares valued at $46.98 million.