Billionaire Michael Price’s Best Ideas for 2016

Michael Price is the founder and manager of New York-based MFP Investors LLC. Although the value-focused hedge fund may not be as recognizable as other players in the industry, Price’s investment firm is widely-known for its focus on undervalued, unpopular and overlooked small-cap companies. The renowned investor’s equity portfolio was worth $811.38 million at the end of 2015, up from $669.06 million at the end of the third quarter. In terms of performance, MFP’s long positions in companies with a market capitalization of at least $1 billion generated a negative weight average return of 3.8% in 2015, based on the size of those positions at the beginning of each quarter. Given the hedge fund’s affinity towards small-cap stocks, we figured it would be particularly interesting to take a look at its most noteworthy moves made in the final quarter of 2015.

At Insider Monkey, we follow the activity of several hundred of the best-performing hedge funds as part of our strategy. We analyze their 13F filings and use the data to see what stocks they are collectively bullish on. Through extensive research we have determined that the best approach to outperform the broader indices is to follow hedge funds into their top small-cap ideas (see more details here).

Of course, it is close to impossible to examine Michael Price’s equity portfolio without pointing out his largest equity holding, which is represented by Intel Corporation (NASDAQ:INTC). MFP Investors held its stake in the chip maker unchanged at 1.85 million shares during the December quarter, with the position being valued at $63.71 million. The shares of the leading provider of platforms in the PC market are down by 15% over the past 12 months, after having dropped by nearly 16% year-to-date. The company’s full-year 2015 net revenue totaled $55.36 billion, down from $55.87 billion reported for 2014. Intel Corporation (NASDAQ:INTC)’s Client Computing Group (CCG) segment, which offers platforms used in notebooks, desktop computers and other devices, continued to face weakness from the PC market throughout 2015. However, the company’s Data Center Group (DCG) segment continued to experience growth, with its net revenue increasing by 11% year-over-year due to higher platform unit sales and average selling prices. There are two key reasons investors may want to hold onto their investments in Intel. First, the stock trades at a forward P/E multiple that is below the average for the Semiconductor Equipment industry at 10.84 versus 12.80. And second, the company pays out an annualized dividend of $1.04 per share, which equates to a dividend yield of 3.61%. Billionaire Ken Fisher of Fisher Asset Management owns 19.60 million shares of Intel Corporation (NASDAQ:INTC) as of the end of December.

Let’s now refocus our attention on four bullish moves made by MFP Investors LLC during the final quarter of 2015. To begin with, the New York-based hedge fund added a 3.58 million-share position in BMC Stock Holdings Inc. (NASDAQ:STCK) to its portfolio during the December quarter, which was worth $59.94 million and represented the fund’s second-largest equity holding. In early December 2015, Stock Building Supply Holdings and building materials provider Building Materials Holding Corp merged to create a leading construction materials supplier in the nation called BMC Stock Holdings Inc. (NASDAQ:STCK). The newly-combined entity had $2.6 billion in pro forma revenue in 2014 and anticipates run-rate cost synergies of $20 million-to-$25 million within 12 months from the completion of the merger and $30 million-to-$40 million within 24 months. To get a general idea of how material these cost synergies are, they account for roughly 1.5% of combined sales. The shares of the combined company are 13% in the red year-to-date. D.E. Shaw & Co. L.P., founded by David E. Shaw, reported ownership of 2.23 million shares of BMC Stock Holdings Inc. (NASDAQ:STCK) through the recent 13F filing period.

Billionaire Michael Price upped his position in FMC Technologies Inc. (NYSE:FTI) by 445,000 shares during the October-to-December period, ending the quarter with 635,000 shares valued at $21.46 million. The provider of technologies and services to the oil and gas industry has been severely impacted by the decline in crude oil prices, with its shares sliding by 36% over the past year. While the company serves as the market leader in subsea systems, most of its customers reduced their capital spending plans or delayed deepwater projects due to depressed commodity prices. Similarly, FMC Technologies Inc. (NYSE:FTI)’s surface technologies businesses have been impacted by decreased land activity and lower rig counts in North America. The company’s full-year 2015 net revenue declined to $6.36 billion from $7.94 billion in 2014. Indeed, the future financial performance of the energy services provider is highly dependent on crude oil prices, but the stock could represent an attractive long-term bet on a broader industry rebound. Ken Griffin’s Citadel Advisors LLC lifted its position in FMC Technologies Inc. (NYSE:FTI) by 1.45 million shares during the fourth quarter, to 7.80 million units.

MFP Investors LLC initiated a stake of 2.92 million shares in Trinity Place Holdings Inc. (NYSEMKT:TPHS) during the December quarter, which was worth $17.90 million. The real estate holding, investment and asset management company announced in December that its common stock was approved for listing on the NYSE MKT LLC (a market for small-cap companies), with the stock beginning to trade on December 21. The company’s main asset includes a property located in Lower Manhattan. However, Trinity Place Holdings Inc. (NYSEMKT:TPHS) also owns a shopping center located in Florida and other retail locations, in addition to controlling intellectual property assets focused on the consumer sector. Trinity Place Holdings is the successor to retailer Syms Corp., which filed for bankruptcy protection in 2011, and emerged from bankruptcy in 2012. It is believed that Trinity’s portfolio of assets has a lot of potential value, which probably explains Michael Price’s bullishness, though the company’s stock is down by 6% since the beginning of 2016. Richard McGuire’s Marcato Capital Management holds an ownership stake of 4.72 million shares in Trinity Place Holdings Inc. (NYSEMKT:TPHS) as of the end of December.

The New York-based hedge fund also increased its position in S&W Seed Company (NASDAQ:SANW) during the last three months of 2015, by 1.18 million shares, ending the year with 2.47 million shares valued at $10.44 million. The company focuses on breeding, growing, processing and selling agricultural seeds, mainly alfalfa seed. S&W Seed Company (NASDAQ:SANW)’s revenue for the six months that ended December 31 totaled $36.40 million, up from $21.96 million reported for the same period of the prior year. At the same time, the company managed to improve its bottom-line figure during the second half of 2015; S&W Seed reported a net loss of $512,447 for the six month period that ended December 31, compared to the $2.42 million net loss that it reported for the same period of the prior year. Nonetheless, shares of the producer and distributor of alfalfa seed have lost 15% over the past year. Nelson Obus’ Wynnefield Capital acquired a new stake of 767,700 shares in S&W Seed Company (NASDAQ:SANW) during the December quarter.

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