John Horseman founded Horseman Capital, a London-based long/short equity hedge fund, in 2001. According to the fund’s website, it had assets under management (AUM) of over $2.2 billion as of June 30, 2014. The fund recently filed its 13F with the Securities and Exchange Commission (SEC) for the reporting period of June 30, 2015. The filing revealed that Horseman Capital’s U.S. public equity portfolio is worth $388.78 million as of the end of second quarter, an increase of more than 20% from the $321.66 million in holdings it contained at the end of the prior quarter. During the April-June period the fund sold out of three stocks, reduced its holding in one stock, made additional purchases in 11 stocks, and added 12 new stocks to its portfolio. According to the filing, 66% of Horseman Capital’s U.S. public equity portfolio consists of stocks from the financial sector, followed by stocks from the technology sector, which constitute 14%. Moreover, the top ten holdings of the fund account for 91.31% of its public equity portfolio as of the end of June. Wells Fargo & Co (NYSE:WFC), Capital One Financial Corp. (NYSE:COF), and Goldman Sachs Group Inc (NYSE:GS) were Horseman Capital’s top three stock picks at the end of June, and we’ll discuss these picks below.
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Horseman Capital purchased an additional 315,700 shares of Wells Fargo & Co (NYSE:WFC) during the second quarter, taking its total holding in the company to 1.02 million shares valued at $57.6 million as of June 30. The bank recently overtook Industrial & Commercial Bank of China Ltd. as the world’s largest bank in terms of market capitalization, with its market cap currently standing at $297.52 billion. For the second quarter of 2015, Wells Fargo & Co (NYSE:WFC) reported profit of $5.72 billion, down slightly from $5.73 billion in profit that it reported for the same quarter of last year. However, earnings increased from $1.01 to $1.03 per share year-over-year owing to the reduction in the number of outstanding shares of the bank. Analysts have a consensus rating of ‘Overweight’ on the stock, with an average price target of $59.36, very close to its current trading price of $57.95. Through his firm Berkshire Hathaway, legendary investor Warren Buffett raised his already substantial stake in Wells Fargo & Co (NYSE:WFC) by another 2% during the March quarter.
Let’s move on to Horseman Capital’s second top pick heading into the third quarter, Capital One Financial Corp. (NYSE:COF). After increasing its stake by 34% during the first quarter, the fund added another 220,100 shares of the financial services company to its portfolio during the second quarter, taking its total stake to 636,200 shares which were worth almost $56 million at the end of June. Shares of Capital One Financial Corp. (NYSE:COF) fell heavily on July 24 following its second quarter earnings miss revealed the day before. The company posted EPS of $1.78 for the second quarter, which came well below the consensus analysts’ estimate of $1.97, as well as the $2.04 in EPS it reported for the same quarter of last year. On July 23 along with the earnings report, the company also announced that it would be laying off an unspecified number of employees in several states , the majority of whom work in the IT services domain. Thomas E. Claugus‘ GMT Capital initiated a large stake in Capital One Financial Corp. (NYSE:COF) during the first quarter, purchasing over 2.28 million shares during that time.
Goldman Sachs Group Inc (NYSE:GS) was Horseman Capital’s third top stock pick at the end of June. The fund increased its stake in the investment banking giant by 57% during the second quarter to 241,500 shares valued at almost $50.5 million. The company recently reported a 49% year-over-year decline in its second quarter earnings owing to the high legal costs it incurred during the quarter related to the potential settlement of mortgage-related cases against it. Excluding the high litigation expense, its EPS of $4.75 came in above consensus estimates of $3.96. Of the 28 leading analysts that cover the stock, 21 have a ‘Hold’ rating on it. Two of the largest shareholders of Goldman Sachs Group Inc (NYSE:GS), Lansdowne Partners, managed by Alex Snow, and Edgar Wachenheim’s Greenhaven Associates both increased their stake in the investment bank during the January-March quarter, by 13% and 11% respectively.
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