If you are looking for an investor to add to your watchlist in order to identify interesting stocks to invest in, then Arquitos Capital Management should definitely be among your top choices. Arquitos was founded in 2009 by Steven L. Kiel, a graduate of the Illinois State University, and in the last couple of years it is killing in terms of returns. In a period when stock markets are at all-time highs and many hedge funds are lagging the broader indexes, Arquitos stands ahead of the crowd as it returned 64% in 2017 (net of fees) and 55% in 2016. Since its inception in April 2012, Arquitos’ annualized net returns stand at 34.5%.
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Arquitos Capital Management is one of the funds that is worth following based on its past returns. However, because of its small size, the fund doesn’t file a quarterly 13F filing, so we can identify its stock picks only through quarterly letters. A value-oriented fund Arquitos doesn’t invest in mainstream companies or household names. According to its fourth-quarter letter, the only well-known company that Mr. Kiel’s fund holds is Bank of America Corp (NYSE:BAC) and it doesn’t own shares but warrants that were issued under the Troubled Asset Relief Program, which are due later this year and at the beginning of 2019.
Arquitos other investments are less known and much smaller companies, some of which generated huge returns last year. For example, in June, the fund invested in BOSTON OMAHA Corp (NASDAQ:BOMN), an advertising, real estate and insurance company, after it got listed on NASDAQ. In the following six months, BOSTON OMAHA Corp (NASDAQ:BOMN)’s stock surged by 150%. One of the company’s co-chairs and co-CEOs is Alex Rozek, who, incidentally, is the grandson of billionaire Warren Buffett‘s sister and it is likely that some of the stock’s growth can be attributed to this fact, although Mr. Kiel didn’t mention the relation to The Oracle in the letter, but said that both BOSTON OMAHA Corp (NASDAQ:BOMN)’s co-CEOs Alex Rozek and Adam Peterson are talented capital allocators and “it is fun watching them build a sustainable platform.”
Among the investors in our database only a handful invested in BOSTON OMAHA Corp (NASDAQ:BOMN), with Adam Peterson‘s Magnolia Capital Fund being the largest institutional shareholder in the company. Magnolia reported holding a $104.63 position in the company at the end of September.
On the next page, we are going to discuss two other investments of Mr. Kiel, including one company that the manager of Arquitos believes to represent a great opportunity this year.
Sitestar Corporation (OTCMKTS:SYTE) is a tiny, $31 million company, whose main business is providing Internet access in the US and Canada. The company also has a real estate business that purchases, refurbishes and sells real estate. Mr. Kiel serves as Sitestar Corporation (OTCMKTS:SYTE)’s President, CEO and CFO. Over the past year, Sitestar Corporation (OTCMKTS:SYTE)’s stock has surged by 38%, but Arquitos’ return was bigger since the fund participated in a private placement in February. In this way, Sitestar Corporation (OTCMKTS:SYTE) was Arquitos’ biggest contributor last year and Mr. Kiel is “more optimistic than ever about the company’s long-term prospects’.
Even though MMA Capital Management LLC (NASDAQ:MMAC)‘s stock gained 28% last year, it actually dragged lower Arquitos’ overall performance, which says quite a lot. Mr. Kiel considers MMA Capital Management LLC (NASDAQ:MMAC) to be his biggest “near-term opportunities” since there have been several developments that are yet to be reflected in the company’s stock price. Earlier this month, MMA Capital Management LLC (NASDAQ:MMAC) signed a transformational agreement, under the terms of which an outside entiry will acquire some of MMA Capital Management’s assets and will take over management responsibilities. The same entity will buy $8.375 million worth of MMA Capital Management LLC (NASDAQ:MMAC)’s stock at $33.50 apiece, which is currently around 20% higher than the trading price of the stock. Mr. Kiel considers that “there is no reason why shares would not trade at book value, especially considering that the company plans to continue to aggressively repurchase shares.”
Of course, Arquitos’ last year returns are unlikely to happen again and Mr. Kiel pointed that fact in his letter as well. Nevertheless, Mr. Kiel seems to have great stock-picking skills as he focuses on companies that have large insider ownership, big buyback programs and strong incentives for cash generation. He tries to identify companies that have a capital allocation approach that is aligned with outside investors and is looking to buy these companies at “a reasonable valuation.” In any case, we will continue to cover Mr. Kiel and Arquito Capital Management’s performance.
Disclosure: none
