Real Estate Stocks Dominate Tricadia Capital’s Top-5 Holdings

New York-based Tricadia Capital Management recently disclosed the contents of its U.S. equity portfolio via a 13F filing submitted with the SEC. The fund was founded in 2003 by Michael Barnes and Arif Inayatullah, boasted discretionary assets under management (AUM) of $4.83 billion as of June 21, while its equity portfolio contained assets valued at $295.7 million on June 30.

According to Tricadia’s latest filing, its U.S. equity portfolio had a quarterly turnover rate of 61.1% during the second quarter and its top-ten holdings amassed 68.40% of the value of its equity portfolio at the end of that period. The filing also revealed that at the end of June, stocks from the real estate and financial sectors each accounted for 26% of the value of Tricadia’s portfolio. In this article we’ll take a look at the fund’s top-five picks going into the third quarter, three of which belonged to the real estate sector.

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#5. RAIT Financial Trust (NYSE:RAS)

– Shares Owned by Tricadia Capital Management (as of June 30): 6.62 Million

– Value of Holding (as of June 30): $20.73 Million

Let’s start with RAIT Financial Trust (NYSE:RAS), which is the only stock among Tricadia’s top-five holdings in which the fund didn’t make any changes to its stake during the second quarter. The Philadelphia-based real estate investment trust (REIT) lost over 65% of its market capitalization last year. However, its stock has performed well this year, appreciating by 15.36%. The REIT currently pays a quarterly dividend of $0.09 per share, which translates into a stellar annual dividend yield of 11.7%. On August 5, RAIT Financial Trust (NYSE:RAS) reported its second quarter results, declaring a loss per share of $0.08 on revenue of $85.07 million, a curious case of a large bottom-line miss but a huge top-line beat, as analysts’ had expected EPS of $0.13 on revenue of just $25.55 million. Billionaire Jim Simons‘ Renaissance Technologies increased its stake in the company by 15% to 2.55 million shares during the second quarter.

#4. Air Products & Chemicals, Inc. (NYSE:APD)

– Shares Owned by Tricadia Capital Management (as of June 30): 175,000

– Value of Holding (as of June 30): $24.86 Million

Tricadia Capital lowered its stake in Air Products & Chemicals, Inc. (NYSE:APD) by 9% during the second quarter. The fund first initiated its stake in the industrial gases company during the second quarter of 2014. Air Products & Chemicals’ stock recently broke above a strong technical resistance barrier near the $150 level and is currently trading up by 13.56% year-to-date. The company has hiked its dividend for the last 33 years and owing to its management’s focus on cash flow generation. analysts expect this trend to continue going forward. For its third quarter of fiscal year 2016, Air Products & Chemicals reported EPS of $1.92 on revenue of $2.43 billion, exhibiting strong bottom-line growth compared to the results of EPS of $1.65 on revenue of $2.47 billion for the same quarter of last year. On August 12, analysts at JPMorgan Chase & Co. upgraded the stock to ‘Overweight’ from ‘Neutral’ and also hiked their price target on it to $160 from $140. David Stemerman‘s Conatus Capital Management upped its stake in Air Products & Chemicals, Inc. (NYSE:APD) by 65% to 465,208 shares during the second quarter.

We’ll check out Tricadia Capital’s top-three stock picks on the next page.

#3. Danaher Corporation (NYSE:DHR)

– Shares Owned by Tricadia Capital Management (as of June 30): 250,000

– Value of Holding (as of June 30): $25.25 Million

Moving on, Danaher Corporation (NYSE:DHR) was a new entrant to Tricadia Capital’s equity portfolio during the second quarter. Last month, the company completed the process of splitting its business into two entities by spinning off Fortive Corp (NYSE:FTV). Following the spinoff, shares of Danaher Corporation have largely been range-bound. Financial research firm Lawrence Hamtil recently conducted a study which found that Danaher Corporation (NYSE:DHR) was among ten stocks that have outperformed Berkshire Hathaway Inc. (NYSE:BRK.B) since 1990. Most analysts who track the stock currently have a favorable view of it owing to its ability to deliver strong returns with minimum hedging costs. Danaher Corporation has been consistently paying dividends since 1993 and the $0.16 per share quarterly dividend that it currently pays translates into a forward annual yield of almost 0.8%. Billionaire Ken Griffin‘s Citadel Investment Group lowered its holding in Danaher by 41% to 1.34 million shares during the second quarter.

#2. Tiptree Financial Inc (NASDAQ:TIPT)

– Shares Owned by Tricadia Capital Management (as of June 30): 4.83 Million

– Value of Holding (as of June 30): $26.48 Million

Amid a nearly 4% drop in Tiptree Financial Inc (NASDAQ:TIPT)’s stock during the second quarter, Tricadia Capital inched up its stake in the company by 1%. Shares of the financial holding company have been drifting lower since the start of 2015 and have lost almost 14% of their value in 2016. Several analysts who track the stock feel that trading at a price-to-book multiple of only 0.56 makes it extremely cheap at current levels. The company recently reported its second quarter earnings, announcing EPS of $0.17 on revenue of $133.8 million for the period. For the same quarter of the previous year, Tiptree Financial Inc (NASDAQ:TIPT) delivered EPS of $0.47 on revenue of $101 million. Just three hedge funds in our system owned shares of Tiptree on March 31, though their positions amassed 14.80% of its float.

#1. OneMain Holdings Inc (NYSE:OMF)

– Shares Owned by Tricadia Capital Management (as of June 30): 187,399

– Value of Holding (as of June 30): $7.67 Million

Despite being the only stock among Tricadia Capital’s top-9 holdings in which the fund reduced its stake during the second quarter, by 2%, OneMain Holdings Inc (NYSE:OMF) continued to remain its top stock pick at the end of the second quarter. OneMain Holdings lost more than 50% of its market capitalization between December 2015 and February 2016 and although its stock has recovered by a little since then, it is still trading down by almost 30% in 2016. In June, the New York Times published a long expose revealing how financial services companies like OneMain Holdings Inc (NYSE:OMF) have used expert lobbying tactics to make inroads within state capitols in order to grow their business. The company recently came out with its second quarter results, which were much better than analysts had anticipated. While the Street had expected it to report EPS of $0.92 on revenue of $599.66 million, OneMain Holdings declared EPS of $0.96 on revenue of $692 million. Fortress Investment Group owned 73.44 million shares of the company on June 30.

Disclosure: None