Lucas Capital Management Reveals Top Picks for Q3; Apple Inc. (AAPL) and Johnson & Johnson (JNJ) Among Them

Lucas Capital Management LLC is a New Jersey-based investment firm founded by George B. Lucas Jr. and his son, Russell Lucas, in 1996. The firm currently manages over $700 million across four hedge funds, three private equity funds and its legacy private wealth management business. While Lucas Capital Management’s hedge and private equity funds are focused on investing in oil, gas and the broader energy spectrum, the firm’s private wealth management business seeks to construct a diversified portfolio of well-established companies. The investment firm seeks to invest in companies boasting strong growth and fundaments that trade at a reasonable price-to-earnings ratios.

Lucas Capital Management recently submitted its 13F filing for the second quarter of 2016 with the U.S. Securities and Exchange Commission, revealing an equity portfolio worth $141.28 million. This compares with the $136.96 million-portfolio recorded at the end of the March quarter. Expectedly, approximately 44% of the asset manager’s portfolio comprises energy-related equity investments, while healthcare-related investments account for 14% of that portfolio. Without further ado, let’s discuss Lucas Capital Management’s five largest equity holdings as of the end of the second quarter.

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#5. B&G Foods Inc. (NYSE:BGS)

– Shares owned by Lucas Capital Management as of June 30: 112,559

– Value of Lucas Capital Management’s holding as of June 30: $5.43 Million

Lucas Capital Management cut its stake in B&G Foods Inc. (NYSE:BGS) by 14% during the second quarter of 2016 to 112,559 shares. The reduced stake was valued at $5.43 million on June 30 and made up 3.8% of the investment firm’s entire portfolio. The shelf-stable and frozen foods company, whose acquisition-focused growth strategy involves buying unloved brands on sale, has seen its market value jump by 46% since the beginning of 2016. In November 2015, the company completed the acquisition of the Green Giant and Le Sueur brands from General Mills Inc. (NYSE:GIS) for $765 million in cash, an acquisition anticipated to add an estimated $550 million in sales annually. B&G Foods reported second-quarter net sales of $306.38 million, up a whopping 58.2% year-over-year. Net sales of Green Giant contributed $107.2 million to the company’s top line for the quarter. Meanwhile, base business net sales for the quarter decreased by 1.3% year-on-year. Ken Fisher’s Fisher Asset Management owns 79,901 shares of B&G Foods Inc. (NYSE:BGS) as of June 30.

#4. Dorchester Minerals LP (NASDAQ:DMLP)

– Shares owned by Lucas Capital Management as of June 30: 380,578

– Value of Lucas Capital Management’s holding as of June 30: $5.49 Million

The New Jersey-based investment firm reduced its exposure to Dorchester Minerals LP (NASDAQ:DMLP) by 4% during the three-month period ending June 30 to 380,578 shares. The reshuffled stake was worth $5.49 million at the end of the second quarter and accounted for 3.9% of the firm’s portfolio. The Dallas-based owner of producing and non-producing oil and natural gas mineral, royalty, overriding royalty, net profits, and leasehold interests located in 25 states has seen its market capitalization gain 47% thus far in 2016. The company’s first-quarter net operating revenues decreased by 30% year-on-year to $6.13 million, reflecting decreases in sales prices that were partially offset by an increase in lease bonus income. Dorchester Minerals recently announced a quarterly cash distribution of roughly $0.258 per common unit, which equates to a current annual dividend yield of 5.46%. Royce & Associates, founded by Chuck Royce, had 544,119 shares of Dorchester Minerals LP (NASDAQ:DMLP) in its portfolio at the end of March.

#3. Apple Inc. (NASDAQ:AAPL)

– Shares owned by Lucas Capital Management as of June 30: 59,231

– Value of Lucas Capital Management’s holding as of June 30: $5.66 Million

The energy-focused investment firm owned 59,231 shares of Apple Inc. (NASDAQ:AAPL) at the end of the second quarter, 3,176 shares less than at the end of the first quarter. The Apple position was valued at $5.66 million at the end of the June quarter, constituting 4.0% of the firm’s entire pool of holdings. Value-oriented investors like billionaire Warren Buffett would argue that the iPhone maker represents an attractive value play, as Apple shares are currently changing at around 11.9-times expected earnings and offer a dividend yield of 2.17% annually. Just recently, analysts at Daiwa Securities downgraded Apple to ‘Outperform’ from ‘Buy” while raising their price target on the stock to $117 from $109, citing the recent gain in the value of Apple shares and the company’s transition to a services and content company from a digital consumer electronics company. The Cupertino-based company’s iPhone unit sales fell 15% year-over-year to 40.4 million in its latest quarter, partially reflecting weakness on the Chinese market due to the depreciation of the yuan against the U.S. dollar and rising competition from local smartphone makers. Christopher R. Hansen’s Valiant Capital has 999,800 shares of Apple Inc. (NASDAQ:AAPL) among its holdings as of June 30.

#2. Johnson & Johnson (NYSE:JNJ)

– Shares owned by Lucas Capital Management as of June 30: 48,279

– Value of Lucas Capital Management’s holding as of June 30: $5.86 Million

Lucas Capital Management trimmed its position in Johnson & Johnson (NYSE:JNJ) by 4% during the April-to-June period, ending the second quarter with 48,279 shares valued at $5.86 million shares. The position made up 4.2% of the investment firm’s portfolio. In late July, analysts at Deutsche Bank raised their price target on the pharmaceutical giant to $142 from $125 and reiterated their ‘Buy’ rating, citing its diversified portfolio, healthy balance sheet, and improvement across all divisions. “J&J is a master of its own destiny with the luxury of time on its size as the business today is strong and outlook bright”, said Deutsche Bank analysts in a fresh analyst note. Moreover, Deutsche Bank considers J&J a “beacon of safety” relative to industry peers, which warrants the company’s stock a premium valuation. Johnson & Johnson, viewed as one of the most innovative companies in the healthcare space, has seen its market capitalization spike by 21% since the beginning of the year. Donald Yacktman’s Yacktman Asset Management owns 6.67 million shares of Johnson & Johnson (NYSE:JNJ) as of the end of the second quarter.

#1. Sabine Royalty Trust (NYSE:SBR)

– Shares owned by Lucas Capital Management as of June 30: 202,525

– Value of Lucas Capital Management’s holding as of June 30: $6.77 Million

Sabine Royalty Trust (NYSE:SBR) was the largest position in Lucas Capital Management’s pool of holdings at the end of June, accounting for 4.8% of the investment firm’s portfolio. The New Jersey-based asset manager upped its stake in the company by a mere 1,891 shares during the June quarter to 202,525 shares. The increased stake was valued at $6.77 million on June 30. Sabine Royalty Trust, which holds royalty and mineral interest in various producing and proved underdeveloped oil and gas properties, has seen its market value increase by 35% so far in 2016. The company’s royalty income for the first quarter of 2016 decreased by approximately 54% year-over-year to $6.97 million, reflecting a decrease in the pricing of both natural gas and oil, as well as decreases in production of both oil and natural gas. Sabine Royalty Trust recently declared a monthly cash distribution of $0.1346 per unit for July, which yields 6.39% annually. Murray Stahl’s Horizon Asset Management owned roughly 45,000 shares of Sabine Royalty Trust (NYSE:SBR) at the end of March.

Disclosure: None