Lomas Capital Management, founded in late 2012 by Daniel Lascano, is a long/short hedge fund based in New York City. The fund’s initial funds of $240.00 million came in large part from Reservoir Capital Group, which invested $200.00 million in the newly-started (at the time) fund. The fund had, according to its latest 13F filing for the reporting period of March 31, a public equity portfolio valued at $568.82 million, largely distributed between three key sectors: consumer discretionary, finance, and materials. Among other developments during the quarter, Lomas Capital added 19 new stocks to his portfolio, increased its stakes in 13 others, and dumped a total of 17 completely. Let’s take a closer look at the top three picks of the fund, which collectively remained the same from the previous reporting period (their order is shuffled), though the fund sold off chunks of its position in two of them during the first quarter. They are Louisiana-Pacific Corporation (NYSE:LPX), Sealed Air Corp (NYSE:SEE) and Realogy Holdings Corp (NYSE:RLGY).
Why are we interested in the 13F filings of a select group of hedge funds? We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole; yet investors have been stuck (until now) investing in all of a hedge fund’s stocks: the good, the bad, and the ugly. 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? These top small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Even better, since the beginning of forward testing at the end of August 2012, the strategy worked just as our research predicted and then some, outperforming the market every year and returning 142% over the last 33 months, which is more than 84 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).
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In Louisiana-Pacific Corporation (NYSE:LPX), Daniel Lascano increased his stake by 2% to 1.96 million shares with a value of $32.29 million and representing 5.67% of his public equity portfolio. The Tennessee-based construction company has increased by 5.4% year-to-date and is up by 21.6% during the last year. The construction industry hasn’t yet totally recovered, and the demand for housing and oriented strand boards (OSB) are still relatively low given historical levels and prices. When OSB prices are recovering and housing is above 1.2 million per year, analysts expect that Louisiana-Pacific Corporation will have good upside and growth potential. When a total recovery for the industry will occur is of course hard to say, but analysts suspect that the threat of higher interest rates on the horizon may increase demand in the near future and boost the housing industry. For the present moment however, Louisiana-Pacific Corporation (NYSE:LPX) shows good results for its side businesses like SmartSide, which is continuing to gain market share, and increase its profitability and revenues. Louisiana-Pacific did also post increased revenues for the first quarter of this year, up by 6% compared to the first quarter of the year before, though the OSB segment remained weak. Ken Griffin from Citadel Investment Group also increased his stake in the stock, by an additional 76% to 10.36 million shares of the construction company.
In conglomerate Sealed Air Corp (NYSE:SEE), Lascano decreased his stake by 22% to 661,185 shares with a value of $30.12 million. The packaging company has returned 23.2% on the exchange year-to-date and is up by an impressive 51.4% during the last year. Sealed Air Corp, founded in 1960 and with its headquarters in Charlotte, North Carolina, increased its earnings for fiscal year 2014 to $1.20 compared to $0.44 the year before. The earnings for the first quarter this year were also up by 39.4% compared to the same quarter the year before, setting the company up for an even better fiscal year 2015. Sealed Air Corp (NYSE:SEE) generates around 65% of its revenue from outside the U.S and 26% in developing markets. John Lykouretzos, representing Hoplite Capital Management also decreased his stake during the quarter, by 19%, leaving him with 5.04 million shares.
In Realogy Holdings Corp (NYSE:RLGY), Lascano decreased his stake by 13% to 565,255 shares with a value of $25.71 million. Realogy Holdings Corp has returned 3.2% year-to-date and is up by 29.1% during the last year. The returns for the first quarter posted earlier this spring met the analysts’ expectations of a loss per share of $0.22 and analysts are now expecting earnings of $0.70 per share for the second quarter, which are scheduled to be posted on August 3. The acquisition of ZipRealty, which Realogy Holdings Corp (NYSE:RLGY) made last summer, added an important online platform to Realogy Holdings Corp (NYSE:RLGY), a purchase that is now beginning to show results. David Gallo‘s Valinor Management LLC decreased his stake in the New York-based real estate brokerage firm by 6% to 2.61 million shares.
Disclosure: None
