This Investor Still Bets on Energy, Biotech Heading Into Q4

Most U.S. equities struggled during the third quarter, which in turn pushed hedge fund investors and other money managers to re-balance their portfolios so as to maintain their risk/return characteristics. It appears that Bernard T. Selz and his team at Selz Capital LLC undertook a massive re-balancing process during the third quarter. In fact, the New York-based hedge fund significantly cut its exposure to U.S. equity markets, considering that it sold out 21 positions and reduced stakes in 15 stocks. The decline comes as Selz’s equity portfolio posted a loss of over 16% in the third quarter, based on our calculations that take into account the fund’s 40 positions in companies with market caps above $1.0 billion.

However, the firm initiated four new positions and increased its holdings in an additional three stocks during the quarter. Hence, it is no surprise why the market value of Selz Capital’s equity portfolio decreased to $362.43 million from $554.04 million quarter-over-quarter. It is also worth mentioning that Selz Capital did not adjust most of its current top holdings, which might point to the fact that the investment firm has faith in the future performance of its top picks.  Ultimately, the following article will discuss the top five holdings of Selz Capital at the end of the third quarter, including their performance during the “bloody” three-month period.

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#5 Gilead Sciences Inc. (NASDAQ:GILD)

Number of shares held by Selz Capital as of June 30: 130,000 ($12.77 million)

Number of shares held Selz Capital as of September 30: 180,000 ($21.07 million)

Gilead Sciences Inc. (NASDAQ:GILD) represents a new addition to the list of top five stock picks of Selz Capital at the end of the third quarter. Nevertheless, the New York-based investment firm reduced its stake in the biopharmaceutical company by 50,000 shares during the latest three-month period. The shares of the company lost 15.80% over this time span, but have advanced more than 5% since the end of the third quarter. When looking at the broader picture, the stock is almost 10% in the green year-to-date. Gilead has been one of the best-performing biotech stocks and companies over the past few years, but the stock has taken a halt this year. The company’s third-quarter earnings report that will be released on October 26 is of crucial importance for the biotech company as a means of avoiding the sell-off in its industry. Cliff Asness’ AQR Capital Management reported owning 4.18 million shares in Gilead Sciences Inc. (NASDAQ:GILD) through the 13F for the June quarter.

#4 Kinder Morgan Inc. (NYSE:KMI)

Number of shares held by Selz Capital as of June 30: 808,211 ($22.37 million)

Number of shares held Selz Capital as of September 30: 808,211 ($31.03 million)

Kinder Morgan Inc. (NYSE:KMI)’s stock performance has been disappointing this year, with its shares losing 25% year-to-date and 26.89% in the third quarter. The energy and energy infrastructure company has been primarily hit by the struggling oil market; hence, market participants might have become more concerned about the future of the company considering the current environment. This disappointing performance may also reflect the worries around the sustainability of its dividends, but Kinder Morgan’s management has the ability to moderate these concerns through the upcoming third-quarter earnings call. Daniel S. Och’s OZ Management is one of the top shareholders of Kinder Morgan Inc. (NYSE:KMI) with 13.11 million shares as of June 30.

#3 Magellan Midstream Partners L.P. (NYSE:MMP)

Number of shares held by Selz Capital as of June 30: 434,650 ($26.13 million)

Number of shares held Selz Capital as of September 30: 434,650 ($31.90 million)

Magellan Midstream Partners L.P. (NYSE:MMP) was another stock that made the top five largest-holdings list of Selz Capital at the end of the third quarter. The energy master limited partnership saw its shares decline by 17.20% in the third quarter. The company’s stock performance has been impacted by the low-oil-price environment, but the headwinds facing the energy sector did not impact Magellan’s financial performance significantly during the second quarter. In fact, the company reported net income of $177.4 million, which was $31.1 million higher year-over-year. Meanwhile, Magellan Midstream Partners’ third-quarter earnings report that is anticipated to be released on November 3 will shed some light on the company’s performance and its future course. John Osterweis’ Osterweis Management holds a 1.19 million-share stake in Magellan Midstream Partners L.P. (NYSE:MMP) as of June 30.

#2 Air Lease Corp (NYSE:AL)

Number of shares held by Selz Capital as of June 30: 944,900 ($29.22 million)

Number of shares held Selz Capital as of September 30: 944,900 ($32.03 million)

Moving on to the second-largest holding of Selz Capital, the investment firm owns 994,900 shares of Air Lease Corp (NYSE:AL) as of September 30 that were worth $29.22 million. The aircraft leasing company, which represented the third-largest position in Bernard Selz’s portfolio at the end of the second quarter, gained the second spot of this list after Selz Capital reduced its stake in Allergan PLC (NYSE:AGN) by roughly 70%. The shares of Air Lease Corp (NYSE:AL) fell by 8.67% in the third quarter, and are 7% in the red year-to-date. At the end of September, the company announced a new long-term lease deal with Leeward Islands Air Transport on a new ATR 72-600 aircraft, which is a sign that its business has not been losing steam. Peter Adam Hochfelder’s Brahman Capital is the largest shareholder of Air Lease Corp (NYSE:AL) within our database, holding 4.56 million shares at the end of June.

#1 Macquarie Infrastructure Corp (NYSE:MIC)

Number of shares held by Selz Capital as of June 30: 999,703 ($74.64 million)

Number of shares held Selz Capital as of September 30: 999,703 ($82.61 million)

Macquarie Infrastructure Corp (NYSE:MIC) retained its spot as the largest holding of Selz Capital. The New York-based investment firm held its position in the company unchanged during the third quarter at 999,703 shares, which were valued at $74.64 million on September 30. Macquarie Infrastructure owns and operates a relatively diversified portfolio of infrastructure businesses that provide services to consumers mainly in the United States. The company’s businesses operate in the segment of infrastructure with high entry barriers, which in turn provide sustainable, stable and growing cash flows over a long-term spectrum. Even so, the stock lost 8.32% during the third quarter, narrowing down the year-to-date gains to slightly over 10%. The company also pays out attractive dividends to its shareholders, as it offered a quarterly cash dividend of $1.11 per share for the quarter that ended June 30. Richard McGuire’s Marcato Capital Management represents another top equity holder of Macquarie Infrastructure Corp (NYSE:MIC) with 3.53 million shares as of June 30.

Disclosure: None