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.
Among the hedge funds that we track, 38 had an aggregate investment of $815.80 million in Colony Capital Inc (NYSE:CLNY) at the end of the fourth quarter. Brian Jackelow‘s SAB Capital Management and Emanuel J. Friedman’s EJF Capital were two other investment firms with exposure to the company.
Swift Run initiated a stake in the operator of kidney dialysis centers, DaVita HealthCare Partners Inc (NYSE:DVA) in the last quarter of 2013 with 35,200 shares. After increments in the following quarters, the stake surged to about 179,600 shares valued at $14.59 million at the end of March. The holding represents 6.36% of the fund’s equity portfolio. DaVita HealthCare Partners Inc (NYSE:DVA)’s stock is up by about 7.09% year to date. The $17.83 billion healthcare company was recently upgraded to ‘Outperform’ by Baird with a $95 price target, which is about 15% above the current trading levels. Legendary investor, Warren Buffett‘s Berkshire Hathaway is the largest shareholder of the company and held 38.57 million shares according to its last filing.
Huntsman Corporation (NYSE:HUN)‘s holding received a major bump as an additional 172,856 shares of the $5.58 billion company were acquired during the January-March quarter. The current stake contains slightly over 626,600 shares valued at $13.89 million. In its financial results for the first quarter, Huntsman Corporation (NYSE:HUN) delivered an EPS of $0.40, which was $0.12 higher than what analysts expected. Quarterly revenues of $2.59 billion, however, came in $260 million lighter than the estimates. Dinakar Singh’s TPG-Axon Management LP held 8.37 million shares of Huntsman Corporation (NYSE:HUN) at the end of 2014.
Microsoft Corporation (NASDAQ:MSFT) and Exxon Mobil Corporation (NYSE:XOM) represented Swift Run’s holdings in mega-caps. Mullen added some 2,550 shares of Microsoft Corporation (NASDAQ:MSFT) to his fund’s portfolio during the first quarter and took his total exposure in the technology giant to 26,290 shares valued at $1.07 million. The company’s turnaround in the recent quarter as compared to the previous one has surprised analysts. Not only the cloud business delivered impressive results, but revenues from Windows also looked to be in better shape than expected. Jeffrey Ubben’s ValueAct Capital held about 74.24 million shares of Microsoft Corporation (NASDAQ:MSFT) at the end of last year.
Moving on to Exxon Mobil Corporation (NYSE:XOM), in which a position was initiated by Swift Run in the first quarter with some 7,098 shares valued at $603,000. Exxon Mobil Corporation (NYSE:XOM) has a 40% stake in an offshore project in Angola and it has been recently announced that production had started at the Kizomba Satellites. A total of 190 million barrels of oil are expected from the project with peak production of 70,000 bbl/day. Donald Yacktman’s Yacktman Asset Management reduced its stake in Exxon Mobil Corporation (NYSE:XOM) by 50% during the fourth quarter to 7.01 million shares valued at $648.25 million.
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