JS Capital Management is a New York-based hedge fund founded and led by Jonathan Soros. Soros, son of legendary hedge fund manager George Soros, used to work together with his father, but ventured off on his own 2012 to form his own fund and is now managing a public equity portfolio valued at $394.76 million, of which 47% was invested in finance stocks, 16% in consumer staples, and 13% in information technology. According to its 13F filing for the reporting period of March 31, the fund opened a stake in 18 stocks and dumped 14. In this article we’ll take a look at the fund’s top small-cap picks, which represent some of its top overall positions. Those stocks are Restoration Hardware Holdings Inc (NYSE:RH), HRG Group Inc (NYSE:HRG) and Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA).
The top small-cap picks of Jonathon Soros are notable to us given the fact that it’s investors like him who add great value to our small-cap strategy system, as they are heavily invested in the success of their small-cap picks and have poured considerable resources into identifying undervalued or under-the-radar companies to invest in. We have found that collectively, hedge funds’ top small-cap picks provide a great investment opportunity, with our strategy having returned over 142% since it was launched at the end of August 2012, beating the market by nearly 85 percentage points (see the details). Don’t get sucked into the mediocre returns of more popular large-cap stocks, invest in the best ideas of the best money managers and beat the market, as the Insider Monkey small-cap strategy has each and every year since its launch.
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So, let’s get the ugly out of the way first; in HRG Group Inc (NYSE:HRG), Soros and his fund hold a stake of 2.09 million shares with a value of $26.14 million, representing 6.62% of its public equity portfolio. It also stood as the fund’s top overall long position as of March 31. The Rochester, New York-based holding company has been a disappointment this year however, dipping by over 8% year-to-date, though it is up slightly since March 31. HRG announced earlier this year that its subsidiary Spectrum Brands had acquired Armored AutoGroup Parent Inc, a purchase that might give the stock some added fuel for future gains. On May 8, HRG Group Inc (NYSE:HRG) posted its earnings for its fiscal second quarter of 2015, posting a loss of $1.16 per share, compared to a loss of $0.63 per share for the same period the year before. The loss for the company’s fiscal first quarter, of $0.56 per share, was also well above the loss for the same quarter 2014, at $0.28. Unconcerned about that however is James H. Litinsky and his JHL Capital Group, which has a stake in the holding company of 5.29 million shares with a value of $66.02 million, making him the fourth-largest stakeholder in HRG Group (NYSE:HRG) among the hedge funds we track.
On to the bad: in Restoration Hardware Holdings Inc (NYSE:RH), Soros didn’t change his stake, still holding 86,000 shares of the company, with a value of $8.53 million as of March 31. California-based Restoration Hardware, founded in 1979, hasn’t managed to create a return for shareholders this spring, with shares down by 0.8% year-to-date. On June 11, the company posted its earnings for its fiscal first quarter of 2015, ending on April 30, announcing $0.23 in earnings per share, $0.03 above analysts’ expectations. Analysts are now expecting Restoration Hardware Holdings Inc (NYSE:RH) to post earnings of $0.85 for the present quarter. The home furnishing company also presented its new product, the “RH Modern”, a minimalistic, aesthetic modern collection of furninshings, with comfort and quality as its cornerstones. The collection is supposed to be launched during the coming fall and, among other things, will feature a standalone RH Modern facility on Beverly Boulevard in Los Angeles. This may please investors Edmond M. Safra of EMS Capital, who doubled his stake in Restoration Hardware (NYSE:RH) during the first quarter to a total of 300,000 shares.
Lastly, the good one was Ariad Pharmaceuticals, Inc (NASDAQ:ARIA), in which Soros increased his stake by 46% to 635,000 shares with a value of $5.23 million. Shares of the Massachusetts-based pharmaceutical and biotechnology firm have enjoyed a strong year, returning 24.5% year-to-date. The earnings for the first quarter were posted on May 7, and while they failed the analysts’ earnings expectations by $0.01 per share, reporting a loss of $0.28, revenue increased 103.4% compared to the same quarter the year before, and revenue tends to be a greater driver of shares than earnings, as in this case. Ariad Pharmaceuticals, Inc (NYSE:ARIA), whose main product is Iclusing, has a treatment called Brigatinib in its pipeline in stage III of testing. The drug is intended to target unique genetic features of cancer cells. Besides Jonathan Soros, Alex Denner from Sarissa Capital Management also keeps a stake in Ariad Pharmaceuticals (NASDAQ:ARIA).
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