With around $400 million in assets under management, Stadium Capital is a hedge fund founded in 1997 and led by Alexander Medina Seaver. The fund employs a research driven approach to investing following the principles of Benjamin Graham and Warren Buffett. The fund invests mainly in public equity markets and in its latest 13F filing it showed holding a total of 12 positions as of the end of 2014. The fund invests mainly in Industrial and Consumer Discretionary stocks, but a small portion of its equity portfolio is dedicated to the Financial sector. Moreover, Stadium Capital is an activist fund, so a significant amount of its returns are obtained not as much through diversifying but through meticulously picking a bunch of companies and then pursuing the management and board for changes aimed towards maximizing the shareholder value of those companies. As of the end of 2014, Stadium’s top five holdings represented around 80% of the total equity portfolio value, and we will discuss each one of them.
On the first spot stands Builders FirstSource, Inc. (NASDAQ:BLDR), a small-cap supplier and producer of structural and related building products for the residential construction market. At the end of 2014, Stadium Capital held almost 12.40 million shares of the company, which represented 12.6% of the company’s outstanding stock. However, even though the $85.16 million position represents over 21% of its equity portfolio, the stake is passive by nature. The stock of Builders FirstSource, Inc. (NASDAQ:BLDR) fell by around 25% over the last year, but Stadium has been holding shares of the company for several years without any significant changes to the holding.
Among all the funds that we track, Builders FirstSource, Inc. (NASDAQ:BLDR) was included in the equity portfolios of 17 of them, down from 19 in the previous quarter. Overall, the funds from our database own around $127.56 million worth of the company’s stock, so with Stadium holding over half of that, we can see that other funds own much smaller positions. Chuck Royce’s Royce & Associates owned around 1.44 million shares as of the end of December, and Clint Carlson‘s Carlson Capital initiated a stake with 300,000 shares during the fourth quarter.
Next on the list is Insperity Inc (NYSE:NSP), according to the fund’s latest 13F filing. However, in a recent 13D filing, Stadium reported cutting its stake in the company to 1.86 million shares, from 2.43 million shares disclosed in the 13F filing. Following the decrease, the activist stake comprises 7.3% of the company’s stock. Last year, Stadium disclosed a letter sent to Insperity Inc (NYSE:NSP)’s shareholders stating that the company’s underperformance was caused, among other things, by poor governance and suggested measures to improve this situation. Recently, another activist has joined the list of Insperity Inc (NYSE:NSP) shareholders: Starboard Value, which in its latest 13F filing disclosed a $38.47 million stake with 1.14 million shares, and had further increased that to a 3.36 million share stake as of January 20. The fund, led by Jeff Smith, urged the company to consider a sale, in order to provide more value to shareholders. In its latest filing, Stadium stated that they agree with the views expressed by Starboard.
Ascena Retail Group Inc (NASDAQ:ASNA) came in third, with Stadium reporting a $74.88 million stake that contains 5.96 million shares. The fund raised its stake in the company by 20% during the fourth quarter. An overview of the data that we have compiled after the end of the latest round of 13F filings shows that the number of funds holding Ascena Retail Group Inc (NASDAQ:ASNA)’s stock went up to 27 from 24, and the aggregate value of their holdings appreciated to some $326.60 million. Stadium has been steadily increasing its exposure to Ascena throughout the last year. Meanwhile, the stock of the women and teen girls apparel retailer lost around 40% during 2014, on the back of weak financial results. During the fourth quarter, Christopher Shackelton and Adam Gray’s Coliseum Capital initiated a stake in Ascena Retail Group Inc (NASDAQ:ASNA) with 1.72 million shares.
In Express, Inc. (NYSE:EXPR) and Big 5 Sporting Goods Corporation (NASDAQ:BGFV), Stadium disclosed ownership of 2.58 million shares and 2.51 million shares respectively. Moreover, in Express, Inc. (NYSE:EXPR) the fund raised its stake by 46% during the fourth quarter. In Big 5 Sporting Goods, even though the stake remained unchanged during the fourth quarter, the fund has been actively exchanging words with the company in the last couple of months. Recently, the board of directors formed a so-called “Super Committee” with full power of the board, but excluded Stadium’s representative, Dominic Demarco. The company said that Mr. Demarco was excluded in order to avoid any conflict of interests and as a response towards Stadium’s aggressive moves. Demarco was appointed to the board in 2011, as the fund was concerned regarding the corporate governance of Big 5 Sporting Goods Corporation (NASDAQ:BGFV). The stock of the sporting goods retailer fell by more than 40% over the last 52 weeks, but it has attracted more attention from investors in the last quarter.
Among the funds that we track, the number of shareholders of Big 5 Sporting Goods Corporation (NASDAQ:BGFV) went up to 19 from 12 in the previous quarter. On the other hand, Express has seen a decrease in popularity with 18 funds reporting long positions, down from 23 funds a quarter earlier. Aside from Stadium, Mario Gabelli’s GAMCO Investors is another shareholder of Big 5 Sporting Goods with 402,500 shares as of the end of December, and Carlson Capital disclosed holding around 4.72 million shares of Express, Inc. (NYSE:EXPR) in its latest 13F filing.
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