Roumell Asset Management Closes Stake in Sandstorm Gold; Buys Stakes in FIG, Polaris Industries

Roumell Asset Management LLC, a value-oriented asset management firm founded by James C. Roumell in 1998, seeks to invest in securities that are out of favor, overlooked or misunderstood. The Chevy Chase, Maryland-based investment firm calls itself an opportunistic capital allocator with a deep value bias, with its equity allocation focusing on smaller companies.

Mr. Roumell and his team seek to build and own a basket of deeply researched, conservatively financed securities that can be bought at a significant discount to their calculation of intrinsic value. The little known asset manager prefers to avoid investing in popular securities, which are said to be very well understood by most investors. As mentioned above, Roumell Asset Management predominantly invests in smaller and mid-sized companies because these groups of companies are more likely to be inefficiently priced. The firm’s Roumell Balanced account, which combines stocks, bonds and cash, generated a net-of-fees return of 5.14% in the second quarter, bringing the return for the first half of the year to 4.69%. Without further delay, let’s have a look at a set of noteworthy moves completed by the value-oriented asset manager during the second quarter of 2016.

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Sandstorm Gold Ltd (NYSEMKT:SAND)

Roumell Asset Management LLC sold out its entire stake of 919,430 shares of Sandstorm Gold Ltd (NYSEMKT:SAND) during the second quarter. The position was worth $3.03 million on March 31 and accounted for 7.7% of the asset manager’s equity portfolio. Sandstorm operates as a gold streaming and royalty company that offers upfront financing to gold mining companies in return for the right to a percentage of the gold produced from those mines. Based on existing gold streams and royalties, the company’s attributable gold equivalent production for 2016 is anticipated to be in the range of 43,000-to-50,000 ounces. Sandstorm anticipates attributable gold equivalent production of 65,000 ounces per annum by 2020. The company’s second-quarter revenue increased to $15.7 million from $15.4 million reported a year ago, mainly reflecting an increase in the average realized selling price of gold. The gold streaming and royalty company has seen its market cap skyrocket by 143% since the start of the year. Jim Simons’ Renaissance Technologies LLC reported ownership of 2.37 million shares of Sandstorm Gold Ltd (NYSEMKT:SAND) through the latest round of 13Fs.

The next two pages of this article will reveal four other noteworthy moves completed by Roumell Asset Management during the second quarter.

Fortress Investment Group LLC (NYSE:FIG)

– Shares Owned by Roumell Asset Management LLC (as of June 30): 240,000
– Value of Roumell Asset Management LLC’s Holding (as of June 30): $1.06 Million

The Maryland-based asset management firm acquired a new stake of 240,000 shares of Fortress Investment Group LLC (NYSE:FIG) during the April-to-June period, valued at $1.06 million on June 30. The position made up 2.4% of the fund’s 13F portfolio. The diversified global investment management firm, which has around $70.2 billion in assets under management as of the end of June, has seen the value of its stock gain a little less than 1% since the start of the year. The U.S. asset manager reported total revenues of $464.3 million for the first half of 2016, down from $535.2 million posted for the same period of the prior year. The decrease was mainly driven by lower incentive income, which is typically dependent upon performance, and a decrease in management fees. Fortress Investment Group recently revealed plans to shut its Fortress Centaurus Global funds, which use a so-called event driven strategy. Ric Dillon’s Diamond Hill Capital owns 3.82 million shares of Fortress Investment Group LLC (NYSE:FIG) as of June 30.

Polaris Industries Inc. (NYSE:PII) Stake to Its Portfolio

– Shares Owned by Roumell Asset Management LLC (as of June 30): 14,135
– Value of Roumell Asset Management LLC’s Holding (as of June 30): $1.16 Million

Polaris Industries Inc. (NYSE:PII) was yet another addition to Roumell Asset Management’s portfolio in the second quarter. The value-oriented asset manager purchased a stake of 14,135 shares during the quarter, which was worth $1.16 million at the end of June. The stake accounted for 2.6% of the equity portfolio. The shares of the Minnesota-based off-road vehicle manufacturer are 9% in the green thus far in 2016. The company’s sales for the second quarter were $1.13 billion, slightly up from $1.12 billion posted a year ago. Polaris Industries sold fewer of-road vehicles (ORVs) in the second quarter of 2016 compared to a year ago, reflecting ongoing softness in North American retail sales in regions heavily dependent on crude oil markets, as well as negative effects from the recent recalls of certain products. After more than 100 off-road machines unexpectedly burst into flames, Polaris Industries announced the recall of around 133,000 recreational off-highway vehicles. Ken Fisher’s Fisher Asset Management was the owner of 219,431 shares of Polaris Industries Inc. (NYSE:PII) at the end of June.

WCI Communities Inc. (NYSE:WCIC)

– Shares Owned by Roumell Asset Management LLC (as of June 30): 90,180
– Value of Roumell Asset Management LLC’s Holding (as of June 30): $1.52 Million

James Roumell and his team also snatched up a new 90,180-share position in WCI Communities Inc. (NYSE:WCIC) during the three months that ended June 30, valued at $1.52 million on the last day of June. This position constituted 3.5% of the equity portfolio value. The lifestyle community developer and luxury homebuilder of single and multi-family homes in the coastal Florida markets has seen its market cap plunge by 23% since the beginning of the year. In a second-quarter letter to investors, Roumell Asset Management laid out several financial characteristics that prompted them to make an investment in WCI Communities. According to the Maryland-based asset manager, WCIC’s “overall financial position and results of operations are strong and the stock trades below reported book value.” Moreover, the asset manager believes that the “reported book value is understated as certain valuable real estate assets are recorded on the company’s balance sheet at an amount below the current re-sale value.” For instance, a set of 12 undeveloped condo-tower pads are worth $0.65 per share on the balance sheet, but they are “worth closer to $3 based on comparable sales.” Royce & Associates, founded by Chuck Royce, owns 134,300 shares of WCI Communities Inc. (NYSE:WCIC) as of the end of the June quarter.

GSI Technology Inc. (NASDAQ:GSIT)

– Shares Owned by Roumell Asset Management LLC (as of June 30): 571,460
– Value of Roumell Asset Management LLC’s Holding (as of June 30): $2.38 Million

Roumell Asset Management LLC added 444,460 shares of GSI Technology Inc. (NASDAQ:GSIT) to its existing position in the company during the April-to-June period, finishing the second quarter with 571,460 shares valued at $2.38 million. The position accounted for 5.4% of the asset management firm’s overall portfolio. The shares of the fabless semiconductor company are up 28% so far in 2016. In the aforementioned letter to investors, Roumell said that their bullish thesis on GSI Technology focuses on “the associative computing technology and the patented intellectual property acquired with MikaMonu,” an Israeli company bought in November 2015. According to the Maryland-based asset manager, Amazon.com Inc. (NASDAQ:AMZN) was shown the company’s cutting-edge in-place associative computing technology, with the e-commerce giant being “very impressed” after running simulations. Roumell Asset Management have been told that “Amazon would like these chips in hand as soon as possible.” The investment firm says they “seem to be paying nothing for the MikaMonu option (free growth investing).” Renaissance Technology LLC has 601,700 shares of GSI Technology Inc. (NASDAQ:GSIT) in its portfolio as of the end of the second quarter.

Disclosure: None