Silver Capital Management, managed by Bruce Silver, is a New York-based, mid-sized investment firm with a relatively small 13F public equity portfolio. The firm manages 151 accounts totaling an estimated $180 million in assets under management and is categorized as providing investment advisory services to 200 clients. The finance sector-focused fund had 32% of its holdings as of June 30 tied up in financial stocks. The investment philosophy at Silver Capital Management is to actively manage portfolios to take advantage of the various economic and market cycles. At the end of the second quarter, the fund had a public equity portfolio valued at $14.42 million, down from $17.08 million at the end of the previous quarter. The top three holdings of the fund were Webster Financial Corporation (NYSE:WBS), AdCare Health Systems, Inc. (NYSEMKT:ADK), and NexPoint Residential Trust Inc (NYSE:NXRT), and we’ll take a peek at these stocks in this article.
We follow hedge funds like Silver Capital because our research has shown that their stock picks historically managed to generate alpha even though the filings are up to 45-days delayed. We used a 60-day delay in our back tests to be on the safe side and our research showed that the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. After adjusting for risk, our calculations revealed that these stocks’ monthly alpha was 80 basis points. We have also been sharing and tracking the performance of these stocks since the end of August 2012, during which time they have returned 118%, outperforming the S&P 500 ETF by over 60 percentage points (see more details here).
Silver Capital held 27,092 shares of Webster Financial Corporation (NYSE:WBS) with a value of $1.07 million at the end of the second quarter, with the position being trimmed by 9% during the quarter. This accounted for 7.43% of the fund’s total portfolio value and vaulted Webster Financial Corporation (NYSE:WBS) into the top spot in the fund’s portfolio. Webster Financial is a bank and financial holding company whose principal assets include the outstanding capital stock of Webster Bank, National Association. The $3.46 billion market cap company operates in three segments: Commercial Banking, Community Banking, and its HSA Bank and Private Banking segment. The company’s latest earnings release delivered results in-line with the estimates of Wall Street analysts, with net income reported for the second quarter being $50.5 million, up by $5.3 million from the same period one year ago. A quarterly cash dividend of $0.23 per share of its common stock was declared by the company, whose shares had equity gains of 8.1% during the second quarter. Going into the third quarter, the largest shareholder of the company is Ken Fisher’s Fisher Asset Management. The fund held 2.68 million shares with a value of $106.00 million.