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Wexford Capital: Joseph Jacobs, Charles Davidson, Private Equity, Energy and Real Estate Investments

In 1994, Charles E. Davidson and Joseph Jacobs co-founded Wexford Capital, a Greenwich, Connecticut-based hedge fund that currently has around $7.0 billion in assets under management. Wexford manages several hedge funds: the opportunistic/global macro Wexford Spectrum Fund, the multi-strategy oriented Wexford Credit Opportunities Fund, the energy and natural resources-focused Wexford Catalyst Fund, and Wexford Global Strategies Fund, which focuses on fixed income. In addition, Wexford has several private equity funds that manage around $6 billion in private equity investments.

Mr. Davidson, an MBA graduate of the University of California, Los Angeles, serves as the Portfolio Management for the Wexford Spectrum, Wexford Catalyst, and Wexford Credit Opportunities funds. Prior to co-founding Wexford, Mr. Davidson worked as the head of domestic corporate bond and proprietary trading at Goldman Sachs between 1977 and 1984 and between 1984 and 1994 he was a General Partner at Steinhardt Partners. Joseph Jacobs, the president of Wexford Capital, worked at Bear Sterns & Co., Inc. between 1982 and 1994. Mr. Jacobs has an MBA from Harvard Business School and was also employed as a commercial lending officer at Citibank between 1979 and 1982.

In addition to holding a vast portfolio of investments across different asset classes, Wexford Capital is also an activist fund specializing in distressed situation investments, due to the background of its co-founders, both of whom have experience in this type of investments. Earlier this year, Wexford acquired a stake in Adeptus Health after the company filed for Chapter 11 bankruptcy. In a filing, the fund said that their view is that the company should have substantial equity value with an appropriate capital structure and suggested the appointment of a special committee to oversee the bankruptcy proceedings and expressed willingness to participate in the appointment. In 2016, Wexford invested in Penn Virginia Corporation (NASDAQ:PVAC), which was also going through bankruptcy and the fund’s Marc McCarthy was appointed to the company’s board of directors following the emergence from bankruptcy.

Charles Davidson - Wexford Capital

Mr. Davidson’s fund also likes to dabble in real estate. Earlier this year. a company managed by Wexford sold a 14,000-square-foot mansion in Florida for $28 million. Last year, a partnership between Wexford and Kenco Communities obtained a $20 million loan to start developing a 73-acre project in Lantana, which will contain 275,000 square feet of retail space and over 1,000 apartments. In October, 2016, Wexford Capital, with two other companies sold the Clima Outdoor building in Miami for $13 million.

Among Wexford’s private investments is Shape Memory Medical, which recently completed a round of funding, with Wexford Capital being among the older investors that acquired stock. Two other private companies that Wexford Capital is invested in are Rebound Therapeutics Corporation and Metanor Resources, both of which have also conducted private placements recently.

In its latest 13F filing with the Securities and Exchange Commission, Wexford Capital disclosed an equity portfolio worth $1.35 billion. The portfolio is fairly diversified across sectors, although energy companies amass the largest share, around 60%. The fund also made some significant changes to its 13F portfolio during the second quarter, as it closed its position in 49 companies and added 96 new holdings. On the following pages, we are going to take a closer look at some of the energy companies that Wexford Capital is bullish on.

1. Mammoth Energy Services Inc (NASDAQ:TUSK)

In Mammoth Energy Services Inc (NASDAQ:TUSK), Wexford Capital raised its stake by 22% to 25.01 million shares worth $465.22 million during the second quarter. Mammoth Energy Services Inc (NASDAQ:TUSK) went public in October 2016, and Wexford was involved in the IPO as the manager of Mammoth Energy Holdings, the largest selling stockholder. Since the IPO, the company’s stock has inched down by nearly 4%. For the second quarter, Mammoth Energy Services Inc (NASDAQ:TUSK), an integrated oilfield service company, posted a net loss of $0.03 per share, better than the expected loss of $0.07, while its revenue of $98.30 million advanced by 42.1% on the year and topped the consensus estimate by $5.43 million. There were seven funds in our database long Mammoth Energy Services Inc (NASDAQ:TUSK) at the end of June; the total value of their holdings amounted to $478.85 million and represented 57.80% of the company’s outstanding stock.

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2. Enterprise Products Partners L.P. (NYSE:EPD)

On the other hand, Wexford Capital cut its position in Enterprise Products Partners L.P. (NYSE:EPD) by 19% over the quarter and held 2.47 million shares worth $66.75 million at the end of June. Enterprise Products Partners L.P. (NYSE:EPD) provides midstream energy services to producers and consumers of natural gas, oil, petrochemicals, natural gas liquids, and refined products. The company’s stock has lost over 5% since the beginning of the year and currently sports a dividend yield of 6.50%, as Enterprise Product Partners increased its dividend to $0.42 from $0.41 earlier this year. During the second quarter, the number of funds tracked by Insider Monkey holding shares of Enterprise Products Partners L.P. (NYSE:EPD) declined by three to 25 during the second quarter.

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3. Marathon Petroleum Corp (NYSE:MPC)

Wexford Capital’s position in Marathon Petroleum Corp (NYSE:MPC) was increased by 27% to 1.27 million shares worth $66.42 million during the second quarter.  Marathon Petroleum Corp (NYSE:MPC)’s stock has surged by nearly 25% over the last 12 months. Last October, the company said that it would drop down some of its assets to its affiliated MLP, MLPX. For the first quarter of 2017, Marathon Petroleum Corp (NYSE:MPC) posted a surprise profit due to an increase in refining margins, but its second quarter results missed the consensus estimates as refining and marketing margins were affected by higher acquisition costs of crude oil. At the end of June, 57 funds followed by us held shares of Marathon Petroleum Corp (NYSE:MPC), up from 53 funds a quarter earlier.

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4. Energy Transfer Partners LP (NYSE:ETP)

In Energy Transfer Partners LP (NYSE:ETP), Wexford Capital boosted its position by nearly fourfold, having amassed 2.27 million shares worth $46.32 million at the end of the second quarter. Energy Transfer Partners LP (NYSE:ETP) is engaged in the transport, terminaling and storage of crude oil, refined products and natural gas liquids. The company’s stock has slid by over 23% since the beginning of the year and currently has a dividend yield of almost 12%. Recently, the company has launched a public offering of 54 million units, which were priced at $18.65 apiece. Among the funds in our database, 14 investors reported long positions in Energy Transfer Partners LP (NYSE:ETP) in the last round of 13F filings, compared to 19 funds a quarter earlier.

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5. Energy Transfer Equity LP (NYSE:ETE)

During the second quarter, Wexford Capital added around 862,100 shares to its stake in Energy Transfer Equity LP (NYSE:ETE) and owns 2.44 million shares valued at $43.75 million according to its latest 13F filing. Energy Transfer Equity LP (NYSE:ETE) is the parent company of the aforementioned Energy Transfer Partners, which also holds equity interests in Sunoco LP. For the second quarter, Energy Transfer Equity LP (NYSE:ETE) reported EPS of $0.18, lower than the expected $0.25, while its revenue advanced by 21% on the year to $8.94 billion, missing the consensus estimate by $2.46 billion. The number of funds from our database bullish on Energy Transfer Equity LP (NYSE:ETE) appreciated by seven to 20 during the second quarter.

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6. Diamondback Energy Inc (NASDAQ:FANG)

In Diamondback Energy Inc (NASDAQ:FANG), Charles Davidson’s fund disclosed a $37.76 million stake containing 425,163 shares as of the end of June. The shares of Diamondback Energy Inc (NASDAQ:FANG), an independent oil and natural gas company, have declined by 13% since the beginning of the year. Its second-quarter revenue surged by almost 140% on the year to $269.40 million and topped the consensus estimate by $4.70 million, while its earnings of $1.40 per share, topped the expectations by $0.49. At the end of June, 37 funds tracked by us held around $705.44 million worth of Diamondback Energy Inc (NASDAQ:FANG)’s stock.

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7. Parsley Energy Inc (NYSE:PE)

Parsley Energy Inc (NYSE:PE) represented Wexford Capital’s largest new position added during the second quarter. At the end of June, the fund held 1.15 million shares worth $32.06 million. Parsley Energy Inc (NYSE:PE)’s stock has dropped by over 30% year-to-date, and has recently taken a hit as the company missed both top- and bottom-line estimates for the second quarter. The independent oil and gas company reported EPS of $0.05, which was $0.06 lower than expected, while its revenue of $213.70 million was lower than the expected $219.20 million, even though it surged by 101% on the year. There were 50 funds in our database long Parsley Energy Inc (NYSE:PE) at the end of the second quarter, compared to 48 funds at the end of March.

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Disclosure: none