ValueWorks’ Top Pick From Each of 5 Prominent Sectors: Gilead (GILD), Boeing (BA), More

ValueWorks LLC is a New York-based, value-focused long/short equity hedge fund founded in 2001 by Charles Lemonides, a CFA who previously served as the Chief Investment Officer of Sterling Advisors, an investment advisory unit of Gruntal & Co. ValueWorks LLC currently manages regulatory assets worth around $150 million, with most of that invested in U.S equities. According to the fund’s 13F filing for the September 30 reporting period, its U.S public equity portfolio was worth nearly $112.5 million at the end of September and comprised stocks from almost every sector.

The filing also revealed that during the third quarter the fund’s equity portfolio had a turnover of only 17.24% and that at the end of that period the top-10 equity holdings of the fund accounted for nearly 55% of its portfolio’s value. An interesting detail that emerged from the filing was that ValueWorks lowered its stake marginally in all of its top-9 equity holdings during the September quarter. In this article, we will take a look at the fund’s top pick from each of five prominent sectors as of the beginning of the final quarter of 2016.

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).

Healthcare: Gilead Sciences, Inc. (NASDAQ:GILD)

– Shares Owned by ValueWorks LLC (as of September 30): 72,811

– Value of the Holding (as of September 30): $5.76 Million

Let’s start with ValueWorks’ top healthcare pick, Gilead Sciences, Inc. (NASDAQ:GILD), in which the fund reduced its stake by a paltry 1% in the third quarter. Shares of the research-based biopharmaceutical company have been on a consistent downtrend since the second-half of 2015 and have lost over one-fourth of their value thus far in 2016. According to technical analysts, after the recent victory of President-elect Donald Trump, Gilead Sciences, Inc. (NASDAQ:GILD)’s stock has broken through its downward channel and could see upside in the short-term. The recent fundamental developments also suggest the same, as just a few days ago the FDA and European Commission approved the company’s drug Vemildy (Tenofovir alafenamide, TAF), which is a once-daily treatment for adults with chronic hepatitis B virus infection with compensated liver disease. On Monday, analysts at Stifel Nicolaus initiated coverage on Gilead with a ‘Buy’ rating and $100 price target, suggesting potential upside of 31.5%.

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Industrials: Boeing Co (NYSE:BA)

– Shares Owned by ValueWorks LLC (as of September 30): 45,581

– Value of the Holding (as of September 30): $6 Million

Boeing Co (NYSE:BA) is one of the oldest equity holdings of ValueWorks, with the fund having initiated its stake in it during the third quarter of 2009. Although the stock has appreciated by over 250% since then, it has really gone nowhere since the last quarter of 2013. Nevertheless, because the company has more than doubled its quarterly dividend in the meantime, its forward yield has gone up significantly, currently standing very close to 3%. Most analysts who cover the stock think that it will continue to move sideways for a long time, as it is currently trading at a trailing P/E of 22.44, which is significantly higher than its average trailing P/E for the past five years of 18.03. For its most recent quarter, Boeing Co (NYSE:BA) reported better-than-expected earnings and revenue, which nonetheless didn’t impress analysts at Goldman Sachs, who on October 27 reiterated their ‘Sell’ rating and $109 price target on the stock.

We’ll check out three more of the fund’s stock picks on the next page.

Technology: Corning Incorporated (NYSE:GLW)

– Shares Owned by ValueWorks LLC (as of September 30): 293,766

– Value of the Holding (as of September 30): $6.95 Million

Moving on, ValueWorks reduced its stake in its top technology pick Corning Incorporated (NYSE:GLW) by 1,893 shares during the third quarter. John A. Levin‘s Levin Capital Strategies also lowered its holding in the company during that time, by 46% to 7.2 million shares. Corning Incorporated (NYSE:GLW)’s stock has regained almost all of the losses it suffered last year and is currently trading up by 28.56% year-to-date. The company currently pays a quarterly dividend of $0.135 per share, which translates into a respectable forward yield of 2.30%. Earlier this month, analysts at Goldman Sachs removed the stock from their ‘Conviction Buy’ list, but continued to remain bullish on it with a ‘Buy’ rating and $27 price target. The firm expects the company to increase its dividend in early-2017, but thinks that Corning’s share buyback program will continue at a slower pace than what was seen this year.

Energy: Cheniere Energy Partners LP Holdings LLC (NYSEMKT:CQH)

– Shares Owned by ValueWorks LLC (as of September 30): 310,006

– Value of the Holding (as of September 30): $7.05 Million

Amid a 14% rise in Cheniere Energy Partners LP Holdings LLC (NYSEMKT:CQH)’s stock during the third quarter, ValueWorks sold 50 shares of the company. Cheniere Energy Partners LP Holdings LLC (NYSEMKT:CQH) became a separate publicly-traded entity in December 2013, when parent Cheniere Energy (NYSEMKT:LNG) sold a minority stake in the company. However, since its listing, Cheniere Energy Partners’ stock has gone nowhere. That poor performance is perhaps one of the reasons why Cheniere Energy (NYSEMKT:LNG) recently announced that it will acquire the publicly-held shares of Cheniere Partners Holdings not already owned by the former in a stock-for-stock exchange. For its third quarter, Cheniere Energy Partners reported EPS of $0.02, in-line with expectations, and revenue of $5.08 million, which missed analysts’ estimate by $0.01 million.

Consumer Staples: Maui Land & Pineapple Co. (NYSE:MLP)

– Shares Owned by ValueWorks LLC (as of September 30): 1.11 Million

– Value of the Holding (as of September 30): $7.4 Million

Maui Land & Pineapple Co. (NYSE:MLP) remained ValueWorks’ top stock pick at the end of September, despite the fund selling 1,119 shares of the company during the third quarter. Shares of the Hawaii-based landholding and operating company have appreciated by more than 20% this year, but are still trading at nearly the same level they were back in the third quarter of 2009, when ValueWorks initiated its stake. On November 3, the company reported its third-quarter results, declaring EPS of $0.13 on revenue of $6.1 million. For the same quarter of the previous year, Maui Land & Pineapple Co. (NYSE:MLP) had reported much stronger EPS of $0.51 on revenue of $14.5 million. Despite the deteriorating results, shares of the company have gained 26% in the last year.

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