Forward Management, the California-based multi-strategy hedge fund that was acquired by Salient Partners last year, recently submitted its 13F filing with the SEC for the reporting period ending September 30. Forward Management was founded in 1998 and for most of its life as an independent firm was headed by J. Alan Reid, Jr., who was the CEO and director of the firm from April 2001 until March 2015. According to Forward Management’s latest filing, its US equity portfolio at the end of September was valued at almost $1.32 billion and its top-10 equity holdings accounted for over half of that value. The filing also revealed that the fund was heavily invested in the real estate and financial sectors entering the final quarter of 2016, with stocks from each of those two sector amassing 41% of the value of its equity portfolio.
In this article we are going to take a look at the five major moves made by Forward Management during the third quarter.
At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).
New York REIT Inc (NYSE:NYRT)
– Shares Owned by Forward Management (as of September 30): 1.45 Million
– Value of the Holding (as of September 30): $13.23 Million
Let’s start with New York REIT Inc (NYSE:NYRT), in which Forward Management increased its stake by 488% during the third quarter. As the name suggests, New York REIT Inc (NYSE:NYRT) focuses on acquiring and owning office and retail properties in Manhattan. Since the start of 2016, shares of New York REIT have fallen by more than 18%. However, the real estate investment trust hasn’t reduced its monthly dividend of $0.40 per share during this period, which has pushed up its forward yield to 4.80%. On November 9, the REIT reported its third quarter results, declaring Funds from Operations (FFO) of $0.09 per share on revenue of $41.26 million, versus analysts’ estimates of FFO of $0.10 per share on revenue of $39.96 million.
Select Income REIT (NASDAQ:SIR)
– Shares Owned by Forward Management (as of September 30): 500,000
– Value of the Holding (as of September 30): $13.45 Million
Select Income REIT (NASDAQ:SIR) dropped several positions in Forward Management’s equity portfolio as the fund cut its stake in the REIT by half during the third quarter. Although shares of Select Income REIT (NASDAQ:SIR) saw a massive decline in the period between 2014 and 2015, they have performed remarkably well this year, registering gains of almost 21%. The REIT currently pays a quarterly dividend of $0.51 per share, which translates into a forward yield of 8.51%. Select Income REIT reported dismal earnings and revenue numbers last month, which prompted analysts at FBR & Co to reduce the price target on the stock to $34 from $35 on October 28, while keeping their rating on it unchanged at ‘Outperform’.
We’ll check out three more of the fund’s stock picks on the next page.
Stag Industrial Inc (NYSE:STAG)
– Shares Owned by Forward Management (as of September 30): 1.37 Million
– Value of the Holding (as of September 30): $33.53 Million
Moving on, Forward Management lowered its stake in Stag Industrial Inc (NYSE:STAG) by 30% during the third quarter. Another hedge fund that reduced its stake in the REIT during that period was billionaire Ken Griffin‘s Citadel Investment Group, which brought its holding down by 77% to 17,256 shares. Stag Industrial Inc (NYSE:STAG) focuses on the acquisition and operation of single-tenant industrial properties across the United States. The REIT currently owns around 290 buildings in over 40 states with around 54.7 million rentable square feet. Its shares have appreciated by over 18% this year, but that hasn’t made a major dent to its forward yield, which still stands at a respectable 6.37%.
Sabra Health Care REIT Inc (NASDAQ:SBRA)
– Shares Owned by Forward Management (as of September 30): 1.86 Million
– Value of the Holding (as of September 30): $46.91 Million
Though the stock of Sabra Health Care REIT Inc (NASDAQ:SBRA) appreciated by over 20% during the third quarter, the REIT still dropped three positions during that period to become Forward Management’s seventh-largest equity holding at the end of September, as the fund reduced its stake in it by 22%. Looking back, it seems that Forward Management made a smart move, as shares of Sabra Health Care REIT Inc (NASDAQ:SBRA) have given up all of those the gains in the current quarter and are currently trading up by only 1.24% year-to-date. Most of the fall that the stock has seen came recently when the REIT reported FFO of $0.54 per share for the third quarter, missing analysts’ estimate by $0.03. Nevertheless, its revenue for the quarter saw a 3.3% year-over-year increase to $61.93 million. Currently, Sabra Health Care REIT’s stock sports an average rating of ‘Hold’ and an average price target of $24.33 from the 13 leading analysts on the Street who track it.
SPDR Bloomberg Barclays 1-3 Month T Bill (ETF) (NYSEARCA:BIL)
– Shares Owned by Forward Management (as of September 30): 1.17 Million
– Value of the Holding (as of September 30): $53.58 Million
Finally, Forward Management lowered its stake in the SPDR Bloomberg Barclays 1-3 Month T Bill (ETF) (NYSEARCA:BIL), which was its top equity holding at the end of second quarter, by 58% during the third quarter, relegating the ETF to the third spot in its portfolio. The SPDR Bloomberg Barclays 1-3 Month T Bill (ETF) (NYSEARCA:BIL) tracks and seeks to provide the investment results that correspond generally to the price and yield performance of the Bloomberg Barclays 1-3 Month U.S. Treasury Bill Index, before fees and expenses. Though the ETF and the Treasury market have seen extreme downside volatility after the results of the Presidential elections were announced, the net asset value (NAV) of the SPDR Bloomberg Barclays 1-3 Month T Bill is still up by 0.10% year-to-date.