Jason Karp‘s Tourbillon Capital Partners, founded in 2013 is a long-short equity hedge fund with a public equity portfolio valued at $3.88 billion. Tourbillon recently disclosed its public equity holdings as of March 31 with the SEC, with its portfolio being heavily dominated by consumer goods stocks, which represent 38% of the value of the portfolio. Other top sectors that Karp, who previously worked with billionaire Steve Cohen at S.A.C Capital Advisors, was invested in were finance, technology and healthcare. In this article we’ll take a look at the top small-cap picks of Karp, which are HRG Group Inc. (NYSE:HRG), Post Holdings Inc (NYSE:POST), and Green Plains Inc (NASDAQ:GPRE).
The top small-cap picks of Jason Karp 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 144% since it was launched at the end of August 2012, beating the market by nearly 85 percentage points (see the details).
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The top small-cap pick of Tourbillon Capital was in British conglomerate HRG Group Inc. (NYSE:HRG). The fund’s stake was increased to 7.95 million shares with a value of $99.22 million, an increase of 135% to the position. HRG, founded in 1845, has suffered through a poor first five months of 2015, posting a negative return of 7.9% year-to-date. The stock has however recovered a bit during the past three months generating a return of 4.8%. On April 28 it was disclosed that Spectrum Brands, a subsidiary that HRG Group Inc. (NYSE:HRG) keeps a majority position in, would buy the American automotive aftermarket company Armored AutoGroup Parent Inc. According to the company, the acquisition will increase and diversify Spectrum’s revenue. The company’s stakes are divvied into four different segments. According to the financial results for the first quarter published on May 8, the Consumer Products segment, which previously-discussed Spectrum belongs to, as well as the Insurance segment, have performed well. The Asset Management and Energy segments on the other hand have underperformed. The energy sector is affected by the decline in oil prices the market has seen since last fall. However, HRG says that it will keep simplifying its cost structure in the energy and asset management segments in order to create equity value. Tourbillon Capital wasn’t the only hedge fund which picked HRG during the first quarter. Jonathan Soros‘ JS Capital holds a stake of 2.01 million shares with a value of $26.14 million, while JHL Capital Group holds 5.29 million shares with a value of $6.60 million.
A new pick by Tourbillon Capital during the first quarter was in Post Holdings Inc (NYSE:POST), in which Karp now owns a stake of 1.93 million shares with a value of $90.17 million. Missouri-based Post Holdings, founded in 1895, joins Karp’s large collection of consumer goods stocks, and the company has returned 4.30% year-to-date, though it has struggled over the past three months. The recent downturn is due to the presence of possible bird flu contamination in up to 35% of Post Holdings’ egg supply. Thanks to this, shares have dropped considerably since it topped out at $51.80 on May 11. While the company can’t yet assess the financial harm the bird flu has had on it, we do know that Michael Foods, Post Holdings’ egg producer, accounted for 28% of Post Holdings’ revenue during the January to September, 2014 period. Other hedge funds that hold stakes in Post Holdings are Bridger Management, with a stake of 1.15 million shares valued at $53.89 million and William Duhamel‘s Route One Investment Company, which has exposure of 13.02% to the stock in its public equity portfolio through a position of 2.43 million shares.
Tourbillon also increased its stake in Nebraska-based ethanol producer Green Plains Inc (NASDAQ:GPRE) by 86% to 2.32 million shares valued at $66.23 million. Green Plains has performed the best of Karp’s small-cap stocks in this article in 2015, achieving a return of 25.42% year-to-date. Green Plains has enjoyed those returns despite the company’s earnings for the first quarter amounting to a loss of $0.09 per share, well below analysts’ expectations of an $0.11 profit. The losses Green Plains Inc (NASDAQ:GPRE) incurred during the first quarter were partly due to depreciation in gas and ethanol prices however, which have since recovered. Analysts’ estimates for the second quarter are very positive, estimating earnings per share to increase to $0.40. Citadel Investment Group and D E Shaw also increased their stakes in Green Plains by 47% and 21%, lifting their stakes to 2.11 million shares and 1.55 million shares respectively.
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