Alden Global Capital, currently valued with an equity portfolio of $567 million, is run by Randall Smith, who is politely called a recluse among notoriously guarded hedge fund managers. Little is known about Smith – no one even knows his actual age or where he got his start – but he has been called the “pioneer of vulture investing.” While that may not be much of a term of endearment, Smith has endured by being diversified among the major sectors such as industrial goods, technology, financial stocks and consumer goods.
His four biggest multi-quarter bets—meaning he has held these stocks for more than just one three-month period—are a cross section of his overall equity portfolio. Because hedge funds’ top picks have market-beating potential, let’s take a closer look at these companies in Alden’s equity portfolio in particular.
With 5.3 million shares, Yahoo! Inc. (NASDAQ:YHOO) is in the number one position. The stock hit a new 52-week high on April 15th, but has drifted lower following disappointing Q1 earnings. First quarter earnings aside, there are still plenty of reasons why Yahoo! Inc. (NASDAQ:YHOO) will remain one of the stronger stocks in the tech sector. Recent partnerships with Dropbox, Alibaba (which is expected to go public at $80 billion) and Flickr are providing Yahoo! Inc. (NASDAQ:YHOO) with diversity that goes well beyond its core business of search engines and email. Not to mention that the company has great metrics with price/book of 1.8x versus an industry average of 4x and a trailing P/E ratio of 7.2x versus 25x for Google Inc (NASDAQ:GOOG).
The best of the rest
At number two is Bank of America Corp (NYSE:BAC) at 12.8% of the Alden Global portfolio. B of A stock fell nearly 5% in one day on disappointing Q1 earnings and a settlement for three mortgage-backed securities lawsuits tied to its Countrywide unit that will cost B of A $500 million. Another drag on B of A and the rest of the banking sector is potential legislation that could require banks to keep 10% of their assets in cash, 15% for banks with assets more than $400 million, also known as Brown-Vitter, eponymously named for the two Senators sponsoring the bill. On the bright side, the Merrill Lynch unit of the company, which was acquired by B of A during the financial meltdown of 2009, reported a 7% gain in earnings for the Q1 from the same period last year. Nonetheless, despite these setbacks, B of A shares are up 3.7% from the start of the year.
Third on the list of Alden’s multi-quarter holdings is Visteon Corporation (NYSE:VC), which supplies climate, electronics, interiors and lighting systems to global automotive equipment manufacturers. Visteon had an 8% decline in revenue for the Q4 of 2012, but was able to increase net income by 25% thanks to much leaner operations (SGA expenses were down 4% and COGS was down 9%). Recently, Visteon Corporation (NYSE:VC) was awarded a development and production program for its latest vehicle infotainment system by a major European car manufacturer. In light of this recent collaboration, Visteon’s audio infotainment segment is expected to grow at an annual rate of 12% over the next five years. Visteon Corporation (NYSE:VC) shares hit a new 52-week high of $61.50 and are up 16% from a year ago.