The Top Stock Picks From Billionaire Wilbur Ross’ Highly Concentrated Equity Portfolio

Invesco Private Capital is a principal investment firm that operates as a subsidiary of global investment giant Invesco Ltd. (NYSE:IVZ). The firm was founded in 1982 by billionaire and turnaround expert Wilbur Ross, who still heads Invesco Private Capital as its Chairman and CEO. At the end of 2014, the firm boasted assets under management of almost $2 billion. Invesco Private Capital recently submitted its 13F with the Securities and Exchange Commission for the reporting period of September 30, revealing a U.S equity portfolio worth nearly $482.7 million. The filing also revealed that Invesco Private Capital runs a highly concentrated portfolio, with positions in just seven stocks at the end of September. Since Invesco Private Capital was invested in only a handful of stocks going into the fourth quarter, in this article we are going to analyze closely the fund’s top five stock picks and try to decipher why the fund is betting specifically on these firms.

At Insider Monkey, we track 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 underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. 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 (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning 102% and beating the market by more than 53 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.

#5 InterXion Holding NV (NYSE:INXN)

 – Shares Owned by Invesco Private Capital (as of September 30): 146,382

 – Value of Holding (as of September 30): $3.96 Million

InterXion Holding NV (NYSE:INXN) was the only company among Invesco Private Capital’s top five stock picks in which fund made changes to its stake during the third quarter. Invesco initiated a stake in InterXion Holding NV (NYSE:INXN) during the second quarter, but it seems the fund soon felt that the company was not tempting enough, selling 45% of its stake during the July-to-September period. Moreover, Invesco was not alone in feeling that way, as the popularity of InterXion among the funds tracked by us also saw a noteworthy drop during the same period, with the number of hedge funds long InterXion Holding NV coming down to 31 by the end of September from 37 at the end of June. On November 5, analysts at Canaccord Genuity reiterated their ‘Buy’ rating on the stock, while upping their price target on it to $34 from $33. Among the funds that increased its stake in InterXion Holding NV during the third quarter was Anand Parekh‘s Alyeska Investment Group, which more than doubled its stake and held almost 1.2 million shares of the company at the end of September.

#4 EXCO Resources Inc (NYSE:XCO)

 – Shares Owned by Invesco Private Capital (as of September 30): 51.1 Million

 – Value of Holding (as of September 30): $38.33 Million

Shares of oil and natural gas company EXCO Resources Inc (NYSE:XCO) have lost nearly half of their value since the start of the year, and their popularity among hedge funds has also been declining over the last few months. From 15 hedge funds that disclosed a stake in it at the end of June, the number went down to 12 by the end of September. On October 27, the company came out with its third quarter financial figures, declaring a per share loss of $0.04 on revenue of $83.50 million versus analyst expectations of a per share loss of $0.08 on revenue of $95.20 million. On October 27, prior to the earnings release, analysts at RBC Capital reiterated their ‘Sector Perform’ rating on the stock, while increasing their price target on it to $1.25 from $1.00. Iconic Canadian investor Prem Watsa‘s Fairfax Financial Holdings also held on to its stake of over 17.5 million EXCO shares during the third quarter.

#3 Cascade Bancorp (NASDAQ:CACB)

 – Shares Owned by Invesco Private Capital (as of September 30): 11.47 Million

 – Value of Holding (as of September 30): $62.0 Million

Though the stock of Cascade Bancorp (NASDAQ:CACB) suffered a major setback in early-January, it has been on a gradual rise ever since and currently trades up by over 15% year-to-date. The bank holding company recently reported its third quarter results, declaring EPS of $0.07 on revenue of $27.23 million. At the end of September, six hedge funds including Invesco Private Capital disclosed having a stake in the company among the more than 700 hedge funds and investment firms covered by Insider Monkey. Additionally, after Invesco Private Capital, Matthew Lindenbaum‘s Basswood Capital was the largest shareholder of Cascade Bancorp (NASDAQ:CACB) among those firms, with ownership of 3.1 million shares as of September 30.

#2 Sun Bancorp, Inc. /NJ (NASDAQ:SNBC)

 – Shares Owned by Invesco Private Capital (as of September 30): 4.25 Million

 – Value of Holding (as of September 30): $81.67 Million

Moving on, similar to the stock of Cascade Bancorp, the stock of Sun Bancorp, Inc. /NJ (NASDAQ:SNBC) also suffered a massive slump in early-January and has been on a slow but steady rise ever since, as it currently trades with year-to-date gains of nearly 14%. However, unlike Cascade Bancorp, Sun Bancorp, Inc. /NJ (NASDAQ:SNBC) managed to blow analysts’ expectations out of the water when it reported its third quarter earnings recently. While analysts had estimated that the company would report EPS of $0.03 on revenue of $16.32 million, the company declared EPS of $0.17 on revenue of $24.04 million. Five of the hedge funds among those we track reported having a stake in Sun Bancorp, Inc. /NJ as of the end of September. The most bullish among them was Anton Schutz‘s Mendon Capital Advisors, which more than doubled its stake in the company to 123,538 shares during the third quarter.

#1 Navigator Holdings Ltd (NYSE:NVGS)

 – Shares Owned by Invesco Private Capital (as of September 30): 21.86 Million

 – Value of Holding (as of September 30): $291.88 Million

Finally, even after suffering a massive drop of nearly 30% during the third quarter, Navigator Holdings Ltd (NYSE:NVGS) managed to retain its spot as Invesco Private Capital’s top equity pick. The decline in the third quarter is also largely responsible for the company trading down by 32.5% year-to-date. While Invesco Private Capital held on to its conviction in the stock even during such a massive slump, it seems other hedge funds were not able to do the same. The number of hedge funds covered by Insider Monkey that reported owning a stake in Navigator Holdings Ltd (NYSE:NVGS) dropped to 11 by the end of September, from 15 at the end of June. On November 10, Navigator Holdings Ltd reported its third quarter earnings, declaring EPS of $0.41 on revenue of $78.20 million versus the Street’s estimate of EPS of $0.45 on revenue of $72.94 million. Ken Griffin‘s Citadel Investment Group reduced its stake in the company by 42,100 shares during the third quarter, to 72,253 shares.

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