Horseman Capital Management Enters Q4 With Four Bank Stocks Atop Portfolio

The broader market sell-off that occurred during the third quarter lowered the valuations of most U.S-listed companies, which became a more attractive destination for the capital held by hedge funds and other investors as a result. Horseman Capital Management’s 13F filing for the September quarter supports this conclusion. The London-based money management firm founded by John Horseman in 2000 increased its holdings in 14 stocks and initiated three new positions during the third quarter. The firm sold out just six of its positions and reduced its holdings in six other stocks. The result was the market value of its portfolio increasing to $393.35 million from $388.79 million quarter-over-quarter. It is highly unlikely that the third quarter performance of the firm’s stock picks lifted the market value of its portfolio, which points to the fact that John Horseman’s firm was buying U.S equities while others were selling. Having this in mind, this article will discuss the top five stock picks of Horseman Capital Management at the end of the third quarter and their performance during the three-month period.

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#5 TJX Companies Inc. (NYSE:TJX)

Shares Owned by Horseman Capital Management (as of September 30): 527,200 shares

Value of Holding (as of September 30): $37.65 million

TJX Companies Inc. (NYSE:TJX) retained its spot on the list of Horseman Capital Management’s top five stock picks. The London-based investment firm increased its position in the off-price retailer of apparel and home fashion by 23,000 shares during the latest quarter, with the enhanced position accounting for 9.57% of the firm’s portfolio on September 30. It is anticipated that the upcoming holiday season’s sales growth will decline relative to the same season last year, but that off-price stores such as TJX might benefit from lower-than-expected tightening of the labor market. TJX shares gained more than 8% during the third quarter, and are up by 5% year-to-date. Gabriel Plotkin’s Melvin Capital Management added a 1.3 million-share position in TJX Companies Inc. (NYSE:TJX) to its portfolio during the June quarter.

#4 Goldman Sachs Group Inc. (NYSE:GS)

Shares Owned by Horseman Capital Management (as of September 30): 251,300 shares

Value of Holding (as of September 30): $43.67 million

Goldman Sachs Group Inc. (NYSE:GS) lost one position in the aforementioned list during the recent quarter, primarily owing to its disappointing stock performance. The stock lost 16.49% in the third quarter, but has advanced by more than 3% since the end of September. According to a recent article published by Reuters, the investment bank is seeking engineers, data scientists, operations staff, and customer service employees, in an attempt to strengthen its consumer lending business. To be more specific, Goldman Sachs is reportedly setting up its online lending business, which is believed to be a strong area of growth for the future. Renowned investor Warren Buffett of Berkshire Hathaway reported ownership of 12.63 million shares of Goldman Sachs Group Inc. (NYSE:GS) via his firm’s 13F for the June quarter.

The three banking stocks which head Horseman Capital’s portfolio will be discussed on the next page.

#3 Bank of New York Mellon Corp (NYSE:BK)

Shares Owned by Horseman Capital Management (as of September 30): 1.22 million shares

Value of Holding (as of September 30): $47.63 million

Bank of New York Mellon Corp (NYSE:BK)’s stock performance in the third quarter was not great either, as its shares lost slightly more than 6% during the three-month period. However, Horseman Capital Management lifted its position in the bank by 47,100 shares during the period. The bank’s third quarter earnings per share outpaced analysts’ expectations of $0.71 by $0.04, despite reporting a drop in revenue. Bank of New York Mellon’s revenue declined by 18% year-over-year to $3.79 billion and missed analysts’ estimates of $3.87 billion. Richard McGuire’s Marcato Capital Management acquired an 18.36 million-share stake in Bank of New York Mellon Corp (NYSE:BK) during the second quarter, making it one of the largest stockholders of the company.

#2 Capital One Financial Corp. (NYSE:COF)

Shares Owned by Horseman Capital Management (as of September 30): 661,700 shares

Value of Holding (as of September 30): $47.99 million

Capital One Financial Corp. (NYSE:COF)’s shares lost 17.16% during the “bloody” third quarter, but Horseman Capital Management remained bullish on the stock. Even more to that, the London-based investment firm increased its position in the bank by 25,500 shares during the September quarter. A potential rate hike by the Federal Reserve could mark a turnaround for the shares of Capital One, considering its high credit card exposure relative to its loan books. It is also important to mention that the pace of interest rate increases might serve as a game-changer, rather than the date of the first rate hike. Thomas E. Claugus’ GMT Capital held its position in Capital One Financial Corp. (NYSE:COF) unchanged during the second quarter at 2.28 million shares.

#1 Wells Fargo & Co (NYSE:WFC)

Shares Owned by Horseman Capital Management (as of September 30): 1.07 million shares

Value of Holding (as of September 30): $54.74 million

Wells Fargo & Co (NYSE:WFC) represents the largest holding of Horseman Capital Management as of the end of the third quarter. John Horseman’s firm boosted its position in Wells Fargo by 41,800 shares over the three-month period, during which the shares of the bank lost 8.10%. The financial services company delivered a solid financial performance in the third quarter, posting revenue of $21.9 billion, which was up by 3% year-over-year. Similarly, the company’s diluted earnings per share increased by 3% year-over-year to $1.05. Nevertheless, the shares of Wells Fargo are still in the red year-to-date. Buffett’s Berkshire Hathaway is indisputably the largest shareholder of Wells Fargo & Co (NYSE:WFC) within our database, owning a whopping stake of 470.29 million shares as of June 30.

Disclosure: None