Tricadia Capital Management Loves These 5 Stocks

Tricadia Capital Management, led by Michael Barnes and Arif Inayatullah, disclosed recently filed its latest 13F with the Securities and Exchange Commission for the reporting quarter ended September 30. The value of the fund’s equity portfolio was valued at $648.56 million at that time. Founded in 2003, New York-based Tricadia Capital has about $4 billion in assets under management. The fund had a strong focus on finance and consumer stocks during the last quarter. In this article, we will talk about Tricadia Capital’s top stocks for the third quarter.

We believe that paying attention to hedge funds’ moves is important. Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by more than 53 percentage points since the end of August 2012. These stocks returned a cumulative of 102% vs. a 48.7% gain for the S&P 500 Index (see the details here). That’s why we believe investors should pay attention to what hedge funds are buying.

#5 Constellation Brands Inc. (NYSE:STZ)

Shares held (as of September 30): 340,000

Total Value (as of September 30): $42.57 million

Percent of Portfolio (as of September 30): 6.56%

Constellation Brands Inc. (NYSE:STZ) is a $26.53-billion market cap producer and marketer of beer, wine and spirits. Tricadia Capital likes the company, in which it increased its position by more than 18% over the quarter. Constellation Brands Inc. (NYSE:STZ) posted impressive financial results for the second quarter fiscal 2016, as the company’s income increased by 54% year-over-year to $302 million, or $1.49 per share. Its sales in the quarter rose by 8% to $1.73 billion. Constellation Brands’ stock has been performing well, with a gain of 35.87% year-to-date. Kensico Capital, run by Michael Lowenstein, held 6.64 million shares of the company as of the end of June.

#4 Webster Financial Corporation (NYSE:WBS)

Shares held (as of September 30): 1,262,087

Total Value (as of September 30): $44.97 million

Percent of Portfolio (as of September 30): 6.93%

Webster Financial Corporation (NYSE:WBS) represents Tricadia Capital’s fourth top holding, despite the investor reduced its position in the company by more than 30% over the quarter. Webster Financial Corporation (NYSE:WBS), the holding company for Webster Bank, reported solid results for the third quarter. Its income available to common shareholders rose to $49.5 million, or $0.54 per share, compared to $47.8 million, or $0.53 per share, for the same quarter a year ago. The company collected $17.6 billion in deposits, up from $15.5 billion a year ago. Webster Financial Corporation (NYSE:WBS)’s stock has surged by 12.32% year-to-date. Another investor betting big on Webster Financial is Ricky Sandler’s Eminence Capital, which reported holding 2.96 million shares at the end of June.

We will talk about three top Tricadia Capital’s holdings on the next page.

#3 Air Products & Chemicals Inc. (NYSE:APD)

Shares held (as of September 30): 387,314

Total Value (as of September 30): $49.41 million

Percent of Portfolio (as of September 30): 7.62%

Tricadia Capital dumped over 3,000 shares of Air Products & Chemicals Inc. (NYSE:APD) during the third quarter. Having a market cap of $29.38 billion, Air Products & Chemicals Inc. (NYSE:APD) is engaged in selling gases and chemicals for industrial uses. For the fiscal fourth quarter ended September 30, the company’s income was $397 million, representing a year-over-year increase of 11%. Its quarterly sales were $2.45 billion, a decrease of 9% from the prior year. Two months ago, Air Products & Chemicals Inc. (NYSE:APD) announced that it will spin off its Materials Technologies business. The company plans to separate the division, to be named Versum Materials, through a tax-free spinoff to shareholders by September 2016. Shares of the company’s stock have climbed up more than 6% year-to-date. Activist Bill Ackman’s Pershing Square held 20.55 million shares of Air Products & Chemicals at the end of June.

#2 Macy’s Inc. (NYSE:M)

Shares held (as of September 30): 968,000

Total Value (as of September 30): $49.68 million

Percent of Portfolio (as of September 30): 7.66%

Tricadia Capital raised its stake in Macy’s Inc. (NYSE:M) by more than 15% during the last quarter. Based in Cincinnati, Ohio, Macy’s Inc. (NYSE:M) is a retail company, with sales of more than $28.105 billion in fiscal 2014. Macy’s Inc. (NYSE:M) saw a decline in its third-quarter operating income to $369 million, compared to $422 million for same quarter last year. Sales decreased by 5.2% to $5.9 billion, compared to the last year’s quarter. The company also revised its 2015 guidance. Now, it expects full-year earnings per share in the range of $4.20 to $4.30, compared to the previous estimate of $4.70 to $4.80. Macy’s Inc. (NYSE:M)’s stock has lost 37.9% year-to-date. Senator Investment Group, run by Doug Silverman and Alexander Klabin, held 6.50 million shares of the company as of the end of the second quarter.

#1 Springleaf Holdings Inc (NYSE:LEAF)

Shares held (as of September 30): 1,946,534

Total Value (as of September 30): $85.10 million

Percent of Portfolio (as of September 30): 13.12%

Tricadia Capital’s top holding is represented by Springleaf Holdings Inc (NYSE:LEAF), a consumer finance company, with a market cap of $5.99 billion. The investor added 60,000 shares to its holding of Springleaf Holdings Inc (NYSE:LEAF) during the third quarter. Springleaf Holdings Inc (NYSE:LEAF) posted a loss of $11 million, or $0.08 per share, for the third quarter, compared to income of $427 million, or $3.70 per share, for a year ago quarter. Springleaf Holdings Inc (NYSE:LEAF)’s shares have increased by 22.2% year-to-date. Michael Novogratz’s Fortress Investment Group reported holding 73.44 million Springleaf Holdings shares as of the end of the second quarter.

Disclosure: none