According to two recent filings with the SEC, Mason Hawkins‘ Southeastern Asset Management has significantly added to its stakes in Triangle Petroleum Corporation (NYSEMKT:TPLM) and Deltic Timber Corp (NYSE:DEL). Some 2.85 million shares of energy company Triangle Petroleum were acquired to lift the total stake at 8.59 million shares. The holding represents 11.4% of the company’s outstanding common stock. Hawkins also increased his firm’s exposure to Deltic Timber Corp (NYSE:DEL) by adding another 437,000 shares to the holding which now amounts to 1.30 million shares and represents 10.3% of the company’s outstanding shares. The above positions are held in part by Southeastern’s affiliated fund, Longleaf Partners Small-Cap Fund.
Professional investors like Hawkins spend considerable time and money conducting due diligence on each company they invest in, which makes them the perfect investors to emulate. However, we also know that the returns of hedge funds on the whole have not been good for several years, underperforming the market. We analyzed the historical stock picks of these investors and our research revealed that the small-cap picks of these funds performed far better than their large-cap picks, which is where most of their money is invested and why their performances as a whole have been poor. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic the best ideas of the best fund managers on your own? A portfolio consisting of the 15 most popular small-cap stock picks among the funds we track has returned more than 142% and beaten the market by more than 84 percentage points since the end of August 2012, and by 4.6 percentage points in the first quarter of this year (see the details).
Mason Hawkins launched his Tennessee-based investment firm in 1975 along with two other partners, who left the firm in the 1980’s. The fund manager completed his MBA in finance in 1971 from the University of Georgia. Before launching Southeastern, Mason served as Director of Research at both Atlantic National Bank and First Tennessee Investment Management. Southeastern currently has $28.8 billion under its management and the market value of its public equity portfolio stood at $15.93 billion at the end of March, down from $17.38 billion at the end of the previous quarter. The finance and energy sectors represent most of the fund’s holdings, with the largest equity pick being Level 3 Communications, Inc. (NYSE:LVLT).
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Of the 8.59 million shares of Triangle Petroleum Corporation (NYSEMKT:TPLM) that Southeastern now holds, 8.50 million have a shared voting power while 91,100 do not have voting power. The $401.05 million energy holding company operates in three key areas in the Williston Basin of North Dakota and Montana, namely oil and gas exploration, development, and production, oilfield services, and thirdly, midstream services. The stock price of Triangle Petroleum Corporation (NYSEMKT:TPLM) is up by over 10% so far this year. In contrast the oil & gas E&P industry has only gained 2.45% during the same period. After Southeastern, Peter Adam Hochfelder‘s Brahman Capital is the largest stockholder of Triangle Petroleum Corporation (NYSEMKT:TPLM) as it holds about 3.79 million shares valued at $19.07 million.
In the case of Deltic Timber Corp (NYSE:DEL), Southeastern holds 1.28 million shares with shared voting power while 19,100 shares do not have voting power. The investment firm initiated a position in Deltic Timber during the third quarter of 2014. Although down over 2% year-to-date, Deltic Timber Corp (NYSE:DEL)’s stock price has appreciated by nearly 8% over the past year.
The hedge fund interest in the company has declined over the past quarter, since only four firms had invested a total of $113.89 million in Deltic Timber Corp (NYSE:DEL) at the end of March compared to six funds with $110.38 million at the end of the previous quarter. Before Southeastern hiked its stake in the $833.51 million natural resources company engaged in manufacturing lumber, Jean-Marie Eveillard‘s First Eagle Investment Management was the largest stockholder of Deltic Timber Corp (NYSE:DEL) owning some 1.10 million shares valued at $73.17 million.
Hawkins cut his fund’s holding in Level 3 Communications, Inc. (NYSE:LVLT), his top pick, by 17% during the first quarter to 45.24 million shares valued at $2.44 billion. The stake represents about 13.5% of the company’s outstanding common shares and 15.3% of Southeastern’s portfolio value. The stock of the $19.77 billion telecommunications company has gained more than 12% so far this year. Even though Level 3 Communications, Inc. (NYSE:LVLT)’s revenues of $2.05 billion for the first quarter missed the estimates by $10 million, its EPS of $0.35 was $0.02 ahead of estimates. The company also raised its guidance for 2015, pointing to growth in EBIDTA in the 14%-17% range, up from an earlier estimate of 12%-16%. Jim Simons‘ Renaissance Technologies holds 4.20 million shares of Level 3 Communications, Inc. (NYSE:LVLT) valued at $226.31 million, and is the second-largest stockholder of the company in our database after Southeastern.
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