Jeffrey Jacobowitz‘s Simcoe Capital Management is a New York-based hedge fund launched in February 2003. As an investment advisory firm, it operates all across the United States. Its founder, Managing Partner, and Portfolio Manager is Mr. Jeffrey (Jeff) Jacobowitz, CPA, who is also the founder and managing partner of Simcoe Partners. He holds a B.A. in Economics from the University of Maryland (UMBC), where he currently studies Finance.
Prior to founding his own firm, he served as a senior accountant at Deloitte & Touche LLP. He worked as a research analyst in numerous companies, including Robotti & Company, Incorporated for twelve years until 2014, where he also served as a managing director, and Robotti & Company, LLC, from 1996 to November 1999. At the time he had been focusing on research and institutional sales. For three years, until 2002, he worked for Private Capital Management, a Florida-based investment management firm, also as an analyst. He served as an Independent Director of Telular Corporation since 2009 and as a Director of Alloy, LLC, since 2010. From February 2017 he served as a Director of Exar Corporation for three months. From August 2018 he also works as an Incoming Investment Banking Analyst at Guggenheim Partners.
Simcoe Capital Management invests in equity securities of small-cap and mid-cap public companies, which are mostly US-based. It utilizes a number of investment techniques, including the use of leverage, short selling and the purchase and sale of options on securities. The fund has a concentrated portfolio with typically no more than 10 to 15 core positions. One of the styles in investing Jeff Jacobowitz is particularly fond of, at least according to what he talked about during the Public Equity Panel Presentation on the 2013 Prime Quadrant Conference, is investing in public companies which are either behaving and being managed as if they are owned by a private equity firm, or are attractive to private equity firms.
During his 15-minutes talk, he discussed the private equity type investing — why is it a smart move, how much capital it requires and how much cash flow will it generate. He also explains what a private equity firm does, what type of companies are attracted to such firms, and basically how does a private equity buyout work. The bottom line is — the ideal candidate for a private equity acquisition would be a company with a strong, stable business that can grow returns to build equity value, a substantial cash flow, and of course, very good management.
He also emphasized that a good capital allocation is vital to the prosperity of a business, ultimately resulting in a better valuation. After all, “there are many public US companies with excellent businesses, but very poor capital allocation”, as Jeff says, naming Microsoft as an example. On the contrary, he highlights that companies like DirecTV which have been practicing a shareholder-friendly capital allocation strategies witnessed their stocks going up throughout years. Between 2007 and 2013, the DirecTV’s stock went up 155 percent since the company had been repurchasing its own shares.
Over the years, Simcoe Capital Management’s returns did fluctuate, however, they remained positive the whole time. For example, its Simcoe Partners, L.P. fund returned an astonishing 32.60% in 2013, which was the highest return in the last five years. In 2014 the fund’s returns decreased by over 18 percentage points to 6.05%. The years 2015 and 2016 were steady for the fund, which returned 5.10% and 5.6%, respectively. In 2017 the fund got back on track with returns of 14.65%. Unfortunately, the same cannot be said for this year as the returns had fallen back to 2.23% from January to October 29. Simcoe Partners, L.P. fund had a total return of 591.10% and a compound annual return of 13.13%. Its worst drawdown was 34.38. As of October 2017, Simcoe Capital Management managed $366.30 million of assets of pooled investment vehicles.
Insider Monkey’s flagship strategy identifies the best performing 100 hedge funds at the end of each quarter and invests in their consensus stock picks. This way it is always invested in the best ideas of the best performing hedge funds and is able to generate much higher returns than the market. Since its inception in May 2014, our flagship strategy generated a cumulative return of 96.9% beating the S&P 500 ETF (SPY) by more than 40 percentage points (see the details here).
On September 30, Simcoe Capital Management’ equity portfolio was valued at $366.03 million. It counted 14 positions, out of which 3 were added during the third quarter, while 3 remained unchanged compared to the previous quarter. Although the stocks in the fund’s portfolio aren’t among the 30 Most Popular Stocks Among Hedge Funds in Q3 of 2018, the fund performed well during the last quarter. Let’s run through the biggest changes on the next page.
The largest two positions Simcoe Capital Management held at the end of the third quarter were in Altice Usa Inc. (NYSE:ATUS) and Nexstar Media Group Inc. (NASDAQ:NXST) occupying 15.1% and 12.65% of its 13F portfolio, respectively. The fund raised its stake in communications and media company Altice Usa Inc (NYSE:ATUS) by 14% to 3,047,215 shares, which were valued at $55.27 million at the end of September. In Nexstar Media Group Inc. (NASDAQ:NXST), a television broadcasting and digital media company, the fund actually lowered its stake by 5% to 569,245 shares worth $46.33 million.
It seems the fund is quite optimistic when it comes to Donnelley Financial Solutions Inc. (NYSE:DFIN) and On Semiconductor Corp (NASDAQ:ON), since these are the companies in which the fund increased its stakes the most during Q3. In Donnelley Financial Solutions Inc. (NYSE:DFIN) the fund’s stake went up by 70% to 1,684,265 shares valued $30.18 million. As for On Semiconductor Corp (NASDAQ:ON), the fund purchased 2,149,450 of the company’s shares for $39.61 million, that way increasing its stake in the company by 51%.
In the meantime, the fund trimmed its positions in a number of companies, some of them being Liberty Broadband Corp (NASDAQ:LBRDA) and Fuller H B Co (NYSE:FUL), by 18% and 1%, respectively. Liberty Broadband Corp (NASDAQ: LBRDA) was the company in which the fund definitely lost interest, holding only 56,957 shares worth $4.8 million at the end of Q3. When it comes to Fuller H B Co (NYSE:FUL), the situation is a bit different — although the fund lowered its holding in the company to 632,860 shares valued at $32.69 million, the company is still one of the fund’s top five largest positions, occupying 8.93% of its portfolio.
Disclosure: None. This article was originally published at Insider Monkey.