Billionaire Wilbur Ross Maintains Top Bets; Swaps Etsy Inc (ETSY) for Fitbit Inc (FIT)

Restructuring specialist and billionaire Wilbur Ross‘ Invesco Private Capital is known for making concentrated bets on a few public companies and holding those bets for a long time. The recent 13F filing submitted by the firm with the SEC stands as an evidence of that investing style, which Invesco Private Capital has followed for many years now. According to the filing, Invesco Private Capital’s long US equity portfolio was worth $473.69 million at the end of June and had a quarterly turnover of only 28.57% during the second quarter. In that period, the fund initiated a stake in one stock, made additional purchases in one stock, sold out its entire holding in one stock, but didn’t reduce its stake in any of its holdings.

The filing also revealed that at the end of second quarter Invesco Private Capital’s equity portfolio consisted of only seven long positions and that more than half of the value of the fund’s equity portfolio was amassed by a single stock from the transport sector. In this post, we will take a look at the two major moves the fund made during the second quarter and will also discuss its top-three stock picks going into the third quarter.

We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points in our backtests that covered the period between 1999 and 2012 (see the details here).

Etsy Inc (NASDAQ:ETSY)

Let’s start with online marketplace Etsy Inc (NASDAQ:ETSY). During the second quarter, Invesco Private Capital sold all of the 35,400 shares that it had held at the end of March. However, the fund might be regretting that decision now as shares of Etsy Inc (NASDAQ:ETSY) have appreciated by 50.60% in the current quarter with most of those gains coming in last month after the company reported its second-quarter numbers. While the per share loss of $0.06 that Etsy reported for that quarter missed analysts’ estimate by $0.05, the revenue of $85.35 million was $4.8 million more than what analysts had expected. On September 14, analysts at Loop Capital initiated coverage on the stock with a ‘Hold’ rating and a price target of $14, which is very close to where the stock is trading currently. The ownership of Etsy Inc (NASDAQ:ETSY) among funds covered by us inched up by one to 16 during the second quarter, while the aggregate value of their holdings in it jumped by $37.9 million to $200.82 million.

Fitbit Inc (NYSE:FIT)

– Shares Owned by Invesco Private Capital (as of June 30): 98,693

– Value of The Holding (as of June  30): 1.2 Million

Fitbit Inc (NYSE:FIT) was a new entry in Invesco Private Capital’s equity portfolio during the second quarter. Shares of the wearable device manufacturer moved up swiftly after the company’s IPO last year, peaking at $51.90 in August 2015. However, they have lost more than two-third of their value since then and are currently trading down by 46% year-to-date. On September 8, the stock spiked by 8% after Mizuho’s analyst Betty Chen released a note in which she reiterated her ‘Buy’ rating on the stock and set a price target of $20 on it. In her note, Ms. Chen cited the favorable reviews that Fitbit Inc’s new products are getting, an addressable market that benefits from both iOS and Android compatibility, and increasing digital health opportunities as the reasons for her bullishness on the stock. Though the number of hedge funds covered by us long Fitbit Inc (NYSE:FIT) inched down by one to 29 during the second the quarter, the aggregate value of their holdings in the company during the same period increased by almost $24 million to $297.86 million.

On the next page, we will discuss the top three equity holdings of Invesco Private Capital as of the end of the second quarter.