During the first quarter of 2014, John Croghan And Richard Fradin, the managers of Rail-Splitter Capital Management have made some important changes to their portfolio, overhauling the top five equity holdings of the fund, except the biggest position – Whirlpool Corporation (NYSE:WHR). Let’s take a look at how the new top looks like and why Croghan and Fradin are betting on these stocks.
Top dog is Whirlpool Corporation (NYSE:WHR), the well known manufacturer of home appliances. Croghan and Fradin have increased their fund’s holding by 15% during the first quarter of 2014, taking it to approximately 85,200 shares valued at $12,7 million. Crispin Odey is also bullish on this stock and holds approximately 1.6 million shares. The company has a market cap of $11.9 billion and pays an annual dividend of $2.50 per share, which represents a yield of 1.6%. The stock is traded at a trailing Price to Earnings (P/E) ratio of 15.xx, which is in line with the industry average of 15.30. For the 2013 fourth quarter, Whirlpool posted revenues of $5.09 billion, EBITDA of $342 million, and earnings per share (EPS)
One stock that faced reduction is Brookdale Senior Living, Inc. (NYSE:BKD), with Rail-Splitter reporting a stake smaller by 6%: approximately 346,100 shares worth $11.6 million. Michael Novogratz is heavily invested in this stock, with is fund holding 17.6 million shares. An operator of senior living communities in the United States, Brookdale has a market cap of $3.93 billion and does not pay a dividend. For the 2013 fourth quarter, the company posted revenues of $734 million and earnings per share of $0.07 for the 2013 fourth quarter. It is expected to register revenues of $746 million and earnings of $0.06 per share for the first quarter of 2014. So far this year, the stock has advanced approximately 18% to a current price of $32.14 per share.
There is also a new entrant into Rail-Splitter’s top 5 stock picks: Harley-Davidson Inc (NYSE:HOG). Croghan and Fradin have built a position which amasses 171,900 shares valued at $11.4 million. The company has a market cap of $15.7 billion and pays an annual dividend of $0.91, the equivalent of a 1.3% yield. So far this year, the stock has been trending sideways, but has still gained 3% and is currently traded at $71.43 per share. 2014 first quarter financial results are as follows: revenues of $1.72 billion and EPS of $1.21. For the current quarter, analysts expect the company to register revenues of $1.84 billion and earnings of $1.47 per share.
Croghan and Fradin have increased their holding of SanDisk Corporation (NASDAQ:SNDK) by 71% making it their 4th biggest investment. As a result, Rail-Splitter now holds 140,650 shares which are estimated to be worth $11.4 million. Rob Citrone of Discovery Capital Management is also a fan and holds approximately 8 million shares. The provider of data storage solutions has seen its stock appreciate by 21% so far this year and is currently trading at a P/E ratio of 17.xx, which is a bit lower than the industry average of 20.10. The company has a market cap of $19 billion and pays an annual dividend of $0.68, corresponding to a yield of 0.8%.
Ending the top 5 is Affiliated Managers Group, Inc. (NYSE:AMG), a provider of investment management services. Rail-Splitter has reported ownership of 56,565 shares valued at $11.3 million, up 31% from the previous quarter. The company has reported revenues of $594 million and earnings of $2.52 per share for the 2013 fourth quarter. Analysts expect it to announce $607 million in revenues and EPS of $2.38 for the first quarter of 2014. The stock is traded at a trailing P/E ratio of 28.xx, higher than the industry average of 19.10. It is recommended mainly as a Buy and Strong Buy.
Disclosure: none.
Recommended reading:
Hedge Fund News: Warren Buffett, John Paulson & Tom Steyer
Camber Capital Management Reveals New Position in Cardica, Inc. (CRDC)
Ralph V. Whitworth Is Betting Big On Clean Harbors Inc (CLH)
