Christopher Shackelton and Adam Gray’s Coliseum Capital has made a slight adjustment to one of its largest positions, according to a Form 4 filed yesterday with the Securities and Exchange Commission. The latest filing is related to Accuride Corporation (NYSE:ACW), in which Coliseum held a 15.2% passive position at the end of 2014. Coliseum has now lowered that slightly, selling just under 77,000 shares at $5.31 per unit, to leave them with 7.15 million shares.
Coliseum Capital, co-founded by Shackelton and Gray in 2005, has a number of client-focused portfolios, with the healthcare-focused fund’s overall equity portfolio consisting primarily of healthcare stocks, at 51.4% at the end of 2014. The fund’s $310.82 million portfolio was highly concentrated on a handful of stocks, with the firm’s top four picks (the top two of which we’ll discuss later in the article) accounting for over 75% of its portfolio value.
Coliseum first opened a new position on Accuride Corporation in the fourth quarter of 2012, purchasing 4.45 million shares. They entered the position around the perfect moment, as shares would hit their two-year low during the quarter, and were about to rebound. Coliseum would build on to the position each quarter throughout 2013, ending that year with 8.22 million shares. In 2014 the fund started to show hesitation towards the stock, holding its position in the first quarter, and then beginning to sell some shares during the next two quarters. However, during the fourth quarter, the stake remained unchanged at 7.23 million shares, valued at $31.39 million.
Shares of Accuride have gained 55.77% since the start of 2013, though the stock still trades nearly 70% below its all-time highs of late 2010 when the manufacturer of auto parts first emerged from bankruptcy, for which it filed in 2009, following the financial crisis and collapse of U.S automakers. Accuride reported its fourth quarter and full-year results for 2014 on Tuesday, reporting a quarterly loss of $5.1 million on revenue of $172.8 million and full year loss of $2.3 million on revenue of $705.2 million.
The Providence Service Corporation (NASDAQ:PRSC) was Coliseum Capital’s top pick heading into 2015, accounting for 26.05% of the value of its portfolio. The position was unchanged over the fourth quarter at 2.22 million shares valued at $80.98 million. Though we reported that the fund boosted its exposure to 2.59 million shares in October, 376,125 of those shares are not reported in 13F filings, as they are not technically owned but can be obtained through the conversion of 150,000 shares of Series A Convertible Preferred Stock which Coliseum holds. However, Coliseum has since raised its position to 4.14 million shares in 2015 (including those 376,125 shares beneficially owned), giving it a 25% stake in the company.
Coliseum first opened a position on Providence Service Corporation in the fourth quarter of 2011 with 566,600 shares, which it would build up to 2.32 million shares by the end of 2012. That was just in time for the start of a strong run by Providence, as it more than doubled over the next two years, during which Coliseum left the position almost entirely unchanged, selling just 100,000 shares in the third quarter of 2014. Despite the strong run, Providence is down slightly over the past 6 months. The company, which operates in two sectors: social services and transportation services, also counts Jim Simons’ Renaissance Technologies as a big shareholder, as the quantitative fund owned 931,700 shares at the end of the year.
LHC Group, Inc. (NASDAQ:LHCG) was Coliseum’s second most valuable position, amounting to 23.5% of the fund’s portfolio value. The 2.34 million shares the fund owned were valued at $73.07 million, and were well above the positions of any other hedge funds we track, accounting for a 13.2% activist stake in the company. James Dondero’s Highland Capital Management owned the next largest position with 194,900 shares. The health care service provider’s most recent earnings report, on February 25, trounced estimates, with earnings per share (EPS) of $0.45 battering the estimates of just $0.11. The company also revised upward its guidance for fiscal 2015 to an EPS between $1.50 to $1.70, while estimates had EPS for the year pegged at $1.51.
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