Swift Run Capital Unveils Its Top Picks Heading Into Q2

Tim Mullen‘s Swift Run Capital Management has recently filed its 13F form with the Securities and Exchange Commission. His readjusted portfolio sheds light on which companies he is expecting to capture most returns from. The fund has about $280 million worth of assets under management and the market value of its equity portfolio at the end of the first quarter stood at $229.38 million, with the finance sector representing nearly 41% of the equity portfolio. Swift Run’s top picks at the end of the March quarter were Colony Capital Inc (NYSE:CLNY), DaVita HealthCare Partners Inc (NYSE:DVA), and Huntsman Corporation (NYSE:HUN). Mullen also raised his exposure to a mega-cap tech company, Microsoft Corporation (NASDAQ:MSFT), and initiated a stake in Exxon Mobil Corporation (NYSE:XOM).

Mullen established his Virginia-based fund, Swift Run Capital Management in May 2003. The choice of firm’s equity investments is driven by a bottom-up approach driven by rigorous fundamental analysis. Its stock portfolio comprises of companies having a wide range of market capitalization. Swift Run also obtains external research pertaining to its prospective investments. Both S&P 500 index and HFR Equal Weighted Strategies Index are used as benchmarks for evaluating the fund’s performance. Besides equity, the fund also invests in fixed income securities comprising of corporate bonds, preferred stocks and such, as well as exchange traded funds.

Insider Monkey tracks hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of 6 basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of 7 basis points per month between 1999 and 2012. These stocks were able to generate alpha because of their lower risk profile. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month. These stocks were slightly riskier, so their monthly alpha was 80 basis points (read the details here). We believe investors will be better off by focusing on small-cap stocks rather than large-cap stocks.

With about 773,500 shares valued at $20.05 million, Colony Capital Inc (NYSE:CLNY) represents Swift Run’s largest equity holding, even though the fund reduced its stake in the company by some 265,600 shares during the first quarter. The Los Angeles-based real estate and investment management firm has a dividend yield of 5.68%. Colony Capital Inc (NYSE:CLNY) recently launched a 7.125% series C preferred stock offering expecting to raise a net amount of $242 million. In case the underwriters exercise their over-allotment options, the amount could reach $278 million. The $2.95 billion residential REIT intends to use the proceeds to repay outstanding amount under its secured revolving credit facility.