Wexford Capital, founded in 1994 and led by Charles Davidson disclosed its public equity portfolio as of March 31 in a 13F filing with the SEC recently. With a public equity portfolio valued at $343.26 million, Wexford is heavily invested in the energy sector, which represents 42% of its portfolio, followed by the consumer discretionary sector at 16%. In this article we’ll take a look at the fund’s top small-cap picks, which includes its longterm top pick Diamondback Energy Inc (NASDAQ:FANG), which at times throughout the past year has moved above the small-cap threshold but currently falls just within it and was also ranked as a small-cap as of March 31.
Why are we interested in the 13F filings of a select group of hedge funds? We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole. These small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Moreover, since the beginning of forward testing from August 2012, the strategy worked just as our research predicted, outperforming the market every year and returning 144% over the last 32 months, which is more than 84 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).
The major holding of Wexford continues to be in Texas-based Diamondback Energy Inc (NASDAQ:FANG), even as the stake was decreased by a significant 80% during the first quarter. Wexford still owns 862,432 shares valued at $66.27 million, which still represents 19.3% of its total public equity portfolio. However that’s a far cry from the greater than 50% exposure Wexford has had to the stock at times throughout the past two-and-a-half years, since it first initiated the position during the fourth quarter of 2012.
As we reported earlier this spring, gas and crude oil company Diamondback has been enjoying a strong bounce-back year thus far, with impressive returns of just under 30% year-to-date. Those returns contributed to Wexford dominating the market in the first quarter. However, the major bulk of those gains occurred between January and April, while the stock has dipped 2.5% in May. Analysts seem bullish about Diamondback Energy Inc (NASDAQ:FANG) still, having a consensus price target of $94.25 on the company’s stock, signifying potential upside of over 20%. Another person who appears to be bullish about Diamondback is John Labanowski of Brenham Capital Management, who increased his stake in Diamondback by 147% to 370,000 shares. Vollero Beach Capital Partners, managed by Robert Vollero and Gentry Beach also went on a buying spree (perhaps buying up some of Wexford’s old shares) increasing its stake to 305,285 shares, an increase of 1,328%. Nonetheless, Wexford still holds the largest stake in the company among the funds in our database, despite steadily selling off the majority of it over the past several quarters.