John Segrich and Michael Molnar‘s Manhattan, New York-based hedge fund, Lorem Ipsum Management recently filed its 13F form with the SEC for the reporting period of March 31. The market value of its equity portfolio increased to $151.48 million as of the end of March from $135.54 million at the end of 2014. Among the top picks of the fund were several bets on alternative energy companies: Sunedison Inc (NYSE:SUNE), TerraForm Power Inc (NASDAQ:TERP), A. O. Smith Corp (NYSE:AOS), and Green Plains Inc (NASDAQ:GPRE).
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Formerly a portfolio manager at Gabelli Asset Management, Segrich joined forces with his ex-colleague from Restorative LLC, Michael Molnar, who also previously served at Greentech Capital Advisors and Goldman Sachs, to launch Lorem Ipsum in 2013. The global equity long/short fund’s investment philosophy is based on the belief that dynamic changes will continue to shape the landscape in the areas of energy, industrials, agriculture, and food and water. Hence it is no surprise that the materials sector contributed 32% to the fund’s portfolio value and energy another 21% at the end of the first quarter, or that the fund is clearly betting on companies developing alternative technologies. Lorem Ipsum also had a particularly high turnover ratio of 92% during the first three months of the year. Assets under the fund’s management amounted to $187 million.
Lorem Ipsum Management is one of over 700 hedge funds that we track at Insider Monkey. We track these investment firms because our research has shown that their stock picks historically managed to generate alpha even though the filings are 45 days delayed. We used a 60-day delay in our backtests to be on the safe side and our research showed that the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. After adjusting for risk, our calculations revealed that these stocks’ monthly alpha was 80 basis points. We have also been sharing and tracking the performance of these stocks since the end of August 2012. These stocks returned 139% over the last 2.5 years, outperforming the S&P 500 ETF by over 80 percentage points (see more details here).
With 525,000 shares valued at $12.60 million, Sunedison Inc (NYSE:SUNE) was the investment firm’s largest equity holding and represented 8.32% of its portfolio value. An additional 25,000 shares of the company were acquired during the quarter. The Sunedison Inc (NYSE:SUNE) holding has paid off exceptionally well for the fund as the stock has appreciated by a hefty 42.29% so far this year. All this has been possible despite the $7.57 billion developer and seller of photovoltaic energy solutions missing both revenue and EPS estimates for the first quarter. The silver lining has been the company topping its guidance for the quarter by delivering 273MW of systems as compared to the guidance of 220MW-250MW. Among the funds in our database, renowned activist investor David Einhorn‘s Greenlight Capital is the largest stockholder of Sunedison Inc (NYSE:SUNE).
Next in line is TerraForm Power Inc (NASDAQ:TERP) with 340,000 shares valued at $12.41 million. The holding formed 8.19% of the portfolio value. Returns from the stake in TerraForm Power Inc (NASDAQ:TERP) were less than those in Sunedison Inc (NYSE:SUNE), but still stood at a towering 25.52%. The fund reduced its holding in the global renewable energy company by 6% over the quarter. TerraForm Power Inc (NASDAQ:TERP) is a yieldco subsidiary of Sunedison that was created in July last year. The company offers a dividend yield of 2.79%. Among other stockholders of the company is Robert Pitts‘ Steadfast Capital Management, which held 3.51 million shares of TerraForm Power Inc (NASDAQ:TERP), according to its latest filing.
The representative from the industrials sector, A. O. Smith Corp (NYSE:AOS) is another outperformer, as the stock has risen by almost 22.3% year-to-date. The fund increased its holding in the company by 17% during the quarter to 150,000 shares valued at $9.85 million. A. O. Smith Corp (NYSE:AOS)’s first quarter EPS of $0.65 beat analyst estimates by $0.03, while revenues of $618.5 million also came in $7 million ahead of expectations. The manufacturer of water heaters and boilers is also found in the portfolios of Bernard Lambilliotte‘s Ecofin Ltd and Ian Simm’s Impax Asset Management.
Green Plains Inc (NASDAQ:GPRE) was another one of Lorem Ipsum’s energy picks, occupying the fourth spot in its equity portfolio with 335,000 shares valued at $9.56 million. An additional 50,000 shares of the company were acquired during the first quarter to push its contribution within the fund’s portfolio to 6.31%. The ethanol producer suffered from the low gasoline and ethanol prices in the first quarter as its net loss per share of -$0.09 for the period was $0.20 below the estimates. Revenues of $728.4 million, however, beat expectations by $13.83 million. Despite the headwinds, Green Plains Inc (NASDAQ:GPRE)’s stock has climbed by 28.65% year-to-date as oil prices have begun to strongly rebound. Ken Griffin’s renowned managed futures fund, Citadel Investment Group is a staunch believer in Green Plains Inc (NASDAQ:GPRE)’s future prospects as it held some 1.44 million shares of the company at the end of the fourth quarter.
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