Lucas Capital Management Bets Big on Energy in Q4

In the most recent 13F filing, Russell Lucas’ Lucas Capital Management revealed that over 50% of its equity portfolio was invested in the energy sector. The New Jersey-based Lucas Capital focuses on the energy markets, specifically in North American oil and gas opportunities. It has about $730 million in assets under management. The value of Lucas Capital’s stood at around $172.5 million at the end of September. In this article, we will take a look at the fund’s top holdings, in term of value for the third quarter.

Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by more than 53 percentage points since the end of August 2012. These stocks returned a cumulative of 102% vs. a 49% gain for the S&P 500 Index (read more details). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).

#5 Johnson & Johnson (NYSE:JNJ)

Shares held (as of September 30): 51,075

Total Value (as of September 30): $4.8 million

Percent of Portfolio (as of September 30): 2.76%

Lucas Capital inched up its position in Johnson & Johnson (NYSE:JNJ) by 1% during the quarter. Johnson & Johnson has recently entered into an agreement to acquire Novira Therapeutics, which is engaged in developing novel therapies for curative treatment of chronic hepatitis B virus (HBV) infection. The deal is expected to close during the fourth quarter. Johnson & Johnson (NYSE:JNJ)’s earnings for the third quarter declined to $3.4 billion, compared to $4.74 billion in a year-ago period. Shares of Johnson & Johnson (NYSE:JNJ) have declined by 3.49% year-to-date. Another investor that sees value in Johnson & Johnson is Ken Fisher’s Fisher Asset Management, which held 10.69 million shares as of the end of September.

#4 B&G Foods Inc. (NYSE:BGS)

Shares held (as of September 30): 143,567

Total Value (as of September 30): $5.2 million

Percent of Portfolio (as of September 30): 3.03%

Lucas Capital’s stake in B&G Foods Inc. (NYSE:BGS) was reduced by 8% during the third quarter. B&G Foods is a $2.08-billion market cap company engaged in selling a diversified portfolio of branded shelf-stable foods across the United States, Canada and Puerto Rico. The company’s stock is up over 20% year-to-date. Recently, B&G Foods Inc. (NYSE:BGS) has acquired the Green Giant and Le Sueur brands from General Mills, Inc. (NYSE:GIS) for $765 million in cash plus an inventory adjustment at closing of about $58 million. B&G Foods Inc. (NYSE:BGS) turned to a profit for the third quarter, as the company reported income of $19.8 million, or $0.34 per share, compared to a loss of $4.4 million, or $0.08 per share a year earlier. B&G Foods was also a favorite stock of Ric Dillon’s Diamond Hill Capital, which owned 1.88 million shares of the company at the end of June.

On the next page, we will discuss the top three picks of Lucas Capital Management, namely, Dorchester Minerals LP (NASDAQ:DMLP), Apple Inc. (NASDAQ:AAPL), and Sabine Royalty Trust (NYSE:SBR).