Willem Mesdag’s Red Mountain Capital disclosed its equity portfolio as of December 31st in its latest 13F filing. According to the filing submitted with the U.S. Securities and Exchange Commission, the investment firm’s top three stock picks last quarter were Air Transport Services Group Inc. (NASDAQ:ATSG), Popeyes Louisiana Kitchen Inc (NASDAQ:PLKI), and Marlin Business Services Corp. (NASDAQ:MRLN).
Red Mountain Capital was founded by Willem Mesdag, who had served as an investment banker at Goldman Sachs for 21 years, before retiring and launching his own hedge fund. The firm invests in publicly-traded small cap stocks, and seeks to engage with management and boards of directors in order to increase shareholder value. Red Mountain makes long-term investments and its partners serve on the boards of several of the companies it holds a stake in. According to Mr. Mesdag, his hedge fund operates like an investment banker, contributing capital to small firms displaying great business models. Red Mountain’s currently boasts an equity portfolio valued at around $410 million, up from $300 million at the end of the third quarter. As of the end of 2014, the hedge fund’s equity portfolio was comprised of 14 stocks from different sectors, ranging from finance to transports.
Red Mountain Capital’s top pick last quarter was Air Transport Services Group Inc. (NASDAQ:ATSG), where it held a position of 11.15 million shares. The holding, which was valued at around $95.5 million, represented 23.27% of the hedge fund’s equity portfolio. Mr. Mesdag’s firm has been backing the company since 2006, when it acquired an initial stake of 3.66 million shares. Once the company recovered from the crash in 2008, share prices began to gradually climb. Over the past five years, the stock has gained around 255% and year-to-date, shares have already appreciated by around 5.5%.
Air Transport Services Group Inc. (NASDAQ:ATSG) is a provider of airline operations, aircraft leasing and maintenance, and other services for the cargo transportation and package delivery industries. As the largest shareholder among institutional investors, Red Mountain Capital has maintained a bullish stance towards the company, which is backed by several other hedge funds. Amongst those betting on the stock is Phil Frohlich’s Prescott Group Capital Management, which holds a position of 6.22 million shares. Gregg J. Powers’ Private Capital Management is also optimistic, holding 1.82 million shares of common stock. These investors are surely excited about the company’s upcoming financial results, as Air Transport Services Group Inc. (NASDAQ:ATSG) has seen favorable earnings estimate revision activity in the past month.
According to its latest 13F filing, Red Mountain owned 1.18 million shares of Popeyes Louisiana Kitchen Inc (NASDAQ:PLKI), valued at around $66.4 million and accounted for over 16% of its equity portfolio. Although the hedge fund had increased its stake in the company by 393% last quarter, it recently reduced its exposure to the stock by 514,400 shares. As disclosed in a 13D filing, Red Mountain currently owns 665,500 shares, representing 2.9% of the company’s outstanding stock. Shares of Popeyes Louisiana Kitchen Inc (NASDAQ:PLKI) have been on an upwards trajectory over the past year, climbing by almost 40% during the last three months of 2014, and gaining more than 8% year-to-date. The hedge fund trimmed its stake in the company the day after the stock hit its 52-week high of $66.49.
Marlin Business Services Corp. (NASDAQ:MRLN) was the third largest holding in Red Mountain’s equity portfolio, with a stake of 2.97 million shares, valued at $61.1 million. Although the hedge fund has held a position in the company for years, last quarter it drastically increased its exposure by acquiring an additional 1.7 million shares. Despite volatility, this equity has grown consistently over the past five years. In addition to gaining more than 100% during this period, the stock has delivered investors quarterly dividends, which have been rising each year. Whereas shareholders received $0.06 per share in 2011, the figure had climbed to $0.12 per share in 2014. In addition to Red Mountain Capital, Marlin Business Services Corp. (NASDAQ:MRLN) has the support of Jim Simons’ Renaissance Technologies, which owns 172,600 shares, among others. However, Mr. Mesdag’s hedge fund holds a much larger stake and is actually the largest shareholder among institutional investors betting on the New Jersey-based provider of equipment financing solutions.
Disclosure: none.
