Toronto-based Breton Hill Capital recently submitted its 13F filing with the SEC for the reporting period of March 31, revealing a U.S equity portfolio worth $271.7 million. The fund was founded by Ray Carroll in 2011 and focuses on liquid market strategies. Mr. Carroll holds a Ph.D. in mathematics from the University of Florida and is also a CFA charterholder. Prior to founding Breton Hill, Mr. Carroll served as a Managing Director and Chief Investment Officer for the Mosaic division of Canada-based, multi-billion dollar alternative investment firm Diversified Global Asset Management. According to Breton Hill Capital’s latest 13F filing, it initiated a stake in 37 stocks during the first quarter. In this article, we’ll take a look at the top five of those new holdings and try to determine why the Canadian firm has taken a liking to those stocks.
We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).
#5 EMC Corporation (NYSE:EMC)
– Shares Owned by Breton Hill Capital (as of March 31): 56,677
– Value of Holding (as of March 31): $1.50 million
Let’s start with EMC Corporation (NYSE:EMC), which is in the process of completing its merger with Dell Inc.. Shares of EMC Corporation (NYSE:EMC) managed to end the first quarter up by 4.22%, however, they have lost some of their value heading into the company’s quarterly earnings report on April 20 and currently trade flat for the year. Analysts project EMC Corporation to report EPS of $0.33 on revenue of $5.64 billion for the first quarter, which would represent slight year-over-year upticks from the EPS of $0.31 on revenue of $5.61 billion it reported for the first quarter of last year. According to recent reports, both EMC Corporation and Dell Inc. are selling some of their assets to reduce the debt burden that they will assume once their $67 billion merger is completed. While EMC Corporation is looking to sell its Documentum business, Dell Inc. plans to sell its software assets Sonicwall and Quest. Charles Paquelet‘s Skylands Capital reduced its holding in EMC Corporation by 12% to 243,650 shares during the first quarter.
#4 Kraft Heinz Co (NASDAQ:KHC)
– Shares Owned by Breton Hill Capital (as of March 31): 19,365 shares
– Value of Holding (as of March 31): $1.52 million
Shares of Kraft Heinz Co (NASDAQ:KHC) have traded in the $70-to-$80 range ever since the merger between Kraft Foods Group and H.J. Heinz Holding Corporation was completed last July. While they are currently trading up by 4.64% year-to-date, some analysts believe that the shares of the company have limited upside from here. According to them, Kraft Heinz Co (NASDAQ:KHC)’s forward P/E of 26 is significantly above the average forward P/E of the consumer staples industry as a whole, which could prevent the stock from going higher unless the company manages to rapidly grow its earnings. The stock does have some believers however, including Susquehanna analyst Pablo Zuanic, who released a note to his clients on April 8 in which he reiterated his ‘Buy’ rating and $93 price target on the stock. In his note, Mr. Zuanic wrote: “We have a strong conviction in the company maintaining its synergy pace and ability to expand margins.” With ownership of over 26.6% of the outstanding shares of Kraft Heinz Co, Warren Buffett‘s Berkshire Hathaway was the largest shareholder of the company at the end of 2015.
The top three new additions to Breton Hill’s portfolio are evaluated on the next page.