Value Holdings LP is a New York-based hedge fund established by its current manager Timothy J. Curro. The hedge fund takes on an interesting and distinguished approach to investing of focusing on the small-cap companies with strong fundamentals and huge piles of cash. The fund’s most recent 13F filing with the SEC reveals that Value Holdings manages a public equity portfolio worth $146.75 million, while its holdings are diversified among the following sectors: 48% in the industrials sector, 39% in the information technology sector, 6% and 5% in the energy and consumer discretionary sectors, respectively. It is also worth noting that the hedge fund oversees a relatively concentrated portfolio, with the top ten holdings accounting for 68% of the total value. In the following article, we will be discussing Timothy Curro’s top stock picks, measured by the value of the holdings. Thus, the top three stock picks of Value Holdings include: Total System Services Inc. (NYSE:TSS), Westinghouse Air Brake Technologies Corporation (NYSE:WAB) and Global Payments Inc. (NYSE:GPN).
But why do we track the hedge funds’ activities? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect the hedge funds’ activities. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period hedge funds’ top small cap stocks edged the S&P 500 index by double digits annually. The 15 most popular small cap stock picks among hedge funds also bested passive index funds by around 65 percentage points over the 34 month period beginning with September 2012 (read the details here).
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Let’s begin by taking a closer look at Value Holdings’ top position, which is represented by Total System Services Inc. (NYSE:TSS). Timothy Curro’s fund reduced its stake in the global payment solutions provider by only 1,500 shares, remaining with 350,206 shares valued at $14.63 million as of June 30. The shares of Total System Services are currently trading near an all-time high, achieving a gain of 37% year-to-date. The company has recently posted better-than-expected financial results for the second quarter, which exceeded both the company’s and analysts’ expectations. The company reported adjusted earnings per share (EPS) from continuing operations of $0.58, which yields an increase of 29.0% over the year. Meanwhile, the revenues posted by the company reached a figure of $692.7 million, up 15.1% year-to-date. Ken Griffin’s Citadel Investment Group represents the largest shareholder of Total System Services Inc. (NYSE:TSS) among the funds we track, holding 4.37 million shares as of the end of March.
Next up on our list is Westinghouse Air Brake Technologies Corporation (NYSE:WAB). Value Holdings sold 12.85% of its equity stake in Wabtec, ending the quarter with 154,600 shares valued at $14.57 million. It seems that the hedge fund cashed out a part of its stake in Wabtec too early, as the stock embarked on an uptrend recently following the announcement of the company’s plans to acquire Faiveley Transport for $1.8 billion. The shares of Wabtec have gained slightly over 16% since the beginning of the current year, but it seems that there is more upside for the stock as the company keeps growing. Wabtec, a provider of technology-based products and services to freight rail and passenger transit industries, is acquiring a leading global provider of value-added, integrated systems and services for the railway industry. Following the completion of the transaction, the combined entity will create one of the largest public rail equipment companies in the world, with annual sales of more than $4.5 billion. Robert Joseph Caruso’s Select Equity Group is among the hedge funds bullish on Westinghouse Air Brake Technologies Corporation (NYSE:WAB) within our database, with an equity stake of 533,233 shares.
Lastly, another noteworthy move completed by Value Holdings discussed in this article is the sale of a part of its stake in Global Payments Inc. (NYSE:GPN). Specifically, the investor trimmed its stake by 31,536 shares to 139,184 shares valued at $14.40 million. Interestingly enough, the shares of Global Payments are also trading at an all-time high, which might actually indicate that Timothy Curro has been quite successful in picking stocks recently. The stock has generated a year-to-date gain of 39%, excluding the quarterly dividends of $0.02 per share. Global Payment has recently announced the financial results for its fourth fiscal quarter and year that ended May 31. The company reported revenues of $706.5 million for the fourth quarter, compared to $674.0 million reported in the same quarter a year ago. In the meantime, the provider of electronic transaction processing services delivered GAAP diluted earnings per share of $0.99 for the quarter, compared to $0.72 reported a year ago. Robert Pohly’s Samlyn Capital is the largest shareholder in Global Payments Inc. (NYSE:GPN) within our database, holding a stake of 2.26 million shares.
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