Debra Fine’s Fine Capital Partners has the distinction of not only being among the few hedge funds on the Street founded by a woman, but also one that boasts assets under management of over a billion dollars. Debra Fine received her MBA from Harvard University, following which she started her career in finance by joining Solomon Brothers. She started Fine Capital Partners, a long/short equity fund in 2004 after serving as Director of Global Equities at Loews Corporation. The fund recently filed its 13F with the Securities and Exchange Commission (SEC) for the reporting period of March 31. The filing revealed that the fund’s current public equity portfolio is worth almost $1.2 billion and is majority constituted of small-cap stocks. Moreover, most of the fund’s equity is currently parked in stocks from the financial and consumer discretionary sectors. In this article we are going to focus on Fine Capital’s top three small-cap picks, which, because of the fund’s focus on small-caps are also its top-picks overall. Those stocks are Assured Guaranty Ltd. (NYSE:AGO), Shutterfly, Inc. (NASDAQ:SFLY), and Evertec Inc (NYSE:EVTC).
A reader might question our decision to focus on the small-cap category, considering that its mostly the larger counterparts of these companies that head the portfolios of most hedge funds. The reason for our focus is simple. Our research has shown that in the period between 1999 and 2012 the top small-cap picks of hedge funds outperformed the broader market by nearly one percentage point per month, whereas the top overall picks (mostly large-caps) underperformed by seven basis points per month during the same period. Why pay high fees to own a glut of low-performing stocks when you can invest on your own in hedge funds’ best stock picks? Since its launch in August 2012, Insider Monkey’s small-cap strategy has outperformed the S&P 500 every year, returning over 142% since then, nearly 2.5 times greater than the S&P 500′s returns (read the details here).
Assured Guaranty Ltd. (NYSE: AGO) remained the top pick of Fine Capital Partners at the end of the first quarter, though the fund’s position in the stock was reduced by 8% to almost 5.2 million shares valued at $137 million in the first quarter. Assured Guaranty Ltd. (NYSE: AGO) is a holding company that through its subsidiaries, provides credit protection products. The stock has a consistent track record of paying dividends to its investors and currently 99% of all outstanding shares of the company are owned by institutional investors. For the quarter ending March 31, the company reported diluted EPS of $1.28 on revenue of $291 million, compared to diluted EPS of $0.23 on revenue of $281 million that it reported for the same quarter last year. All six analysts on the Street that cover the stock have a ‘Buy’ rating on it with an average price target of $35.20, around 20% higher than where it currently trades. Additionally, the Street expects the company to declare an EPS of $0.63 for the second quarter. Apart from Fine Capital, Thomas G. Maheras’ Tegean Capital Management is another fund that has a significant stake in Assured Guaranty Ltd. (NYSE: AGO). Tegean Capital Management increased its stake in the company by 3% to 800,000 shares in the March quarter.