Steven Owsley‘s Madison Street Partners recently disclosed its equity portfolio as of the end of March in a filing with the SEC. Founded in 2004, the long/short value-oriented hedge fund uses both fundamental analysis and technical data on a stock before investing in the company. Fundamental analysis includes the use of valuation ratios including price-to-book, price-to-sales, and price-to-cash flow to glean candidates that show a deviation from their peers or the market. In this article we’ll take a closer look at the $120 million hedge fund and its top picks heading into the second quarter. The market value of Madison Street’s equity portfolio increased to $98.82 million at the end of the first quarter as compared to $64.83 million at the end of the previous quarter. The fund increased its exposure to 11 previously held positions and added 23 new companies to its portfolio. The turnover ratio for the quarter was relatively high at 86.49%. Among the top holdings we’ll discuss were Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK), Apple Inc. (NASDAQ:AAPL), Liberty Media Corp (NASDAQ:LMCK), and Visa Inc (NYSE:V).
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Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK) was Madison Street’s largest holding with some 340,500 shares valued at $16.96 million, with the the stake receiving a boost of 10% during the quarter. The holding represents almost 17.16% of the fund’s portfolio value. Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK) has been in Madison Street’s portfolio since the third quarter of 2008. Although trading nearly sideways year-to-date, Liberty Global’s stock is up by 15.68% over the past calendar year. The $29.68 billion provider of broadband internet, fixed-line telephony and mobile services recently announced its $1.43 billion acquisition of BASE, Belgium’s third-largest mobile operator. This was in conjunction with Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK)’s mobile strategy. Revenues from mobile grew 6% in the first quarter on a year-over-year basis. Among other stockholders of the company, the most notable are Warren Buffett‘s Berkshire Hathaway and Boykin Curry’s Eagle Capital Management.
Moving on to the second-largest holding, Apple Inc. (NASDAQ:AAPL), in which Madison Street holds 60,600 shares valued at $7.54 million after acquiring some 48,100 shares during the quarter. The world’s largest company in terms of market value is in stiff competition as far as the relatively virgin territory of mobile payments is concerned. Recently, it was announced that Apple Inc. (NASDAQ:AAPL) has turned its head eastwards and is in talks with Alibaba Group Holding Ltd (NYSE:BABA) and a few other banks with regards to launching that mobile payment service, Apple Pay, in China. Renowned activist investor Carl Icahn is the largest stockholder of Apple Inc. (NASDAQ:AAPL) among the investors we track.
After increasing its position in Liberty Media Corp (NASDAQ:LMCK) by 66% during the quarter, the holding occupied the third spot in the fund’s equity portfolio, with the stake amounting to some 192,200 shares valued at $7.34 million and representing 7.43% of the fund’s portfolio value. A position in the company was initiated in the third quarter of 2014 with about 96,500 shares and has now been bulked up during each of the following quarters. Liberty Media Corp (NASDAQ:LMCK) has appreciated by 7.34% year-to-date, which compares well with the Broadcast-TV industry, which has risen by just 1.56% during the same period. D E Shaw, founded by David E. Shaw held 9.05 million shares of Liberty Media Corp (NASDAQ:LMCK) according to the fund’s latest filing.
Despite an increase of about 31,900 shares to its holding in Visa Inc (NYSE:V), it continued to occupy the same fourth spot as the previous quarter. The total holding stood at 100,016 shares valued at $6.54 million. In its financial results for the fiscal second quarter, Visa Inc (NYSE:V)’s EPS of $0.63 beat estimates by $0.01, while revenues of $3.41 billion also came in $70 million ahead of expectations. Two other money managers that are fond of Visa Inc (NYSE:V) and hold it in their funds are billionaires Ken Fisher and Stephen Mandel.
Insider Monkey tracks hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points and underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. These stocks were able to generate alpha because of their lower risk profile. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month. These stocks were slightly riskier, so their monthly alpha was 80 basis points (read the details here). We believe investors will be better off by focusing on small-cap stocks rather than large-cap stocks.
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