Two Reputable Hedge Funds Boosted Stakes in These Struggling Companies

The recent stock market pullback has definitely pushed companies’ valuations into cheap territory, so hedge funds and other money managers have been busy amassing “cheap” equities. In the following article we will take a thorough look at the moves made by two reputable investment firms monitored by Insider Monkey. In a recently-amended 13D filing, Neal C. Bradsher’s Broadwood Capital has disclosed adding 499,980 shares, acquired at a weighted average price of $7.12, to its position in STAAR Surgical Company (NASDAQ:STAA) that is now comprised of 8.62 million shares. The freshly-updated stake accounts for 21.6% of the company’s outstanding stock. At the same time, Coliseum Capital, founded by Christopher Shackelton and Adam Gray, reported purchasing 250,214 shares of Accuride Corporation (NYSE:ACW) at a weighted average price of $2.66 via a Form 4 filing with the SEC. Following the recent transactions, Coliseum Capital owns 7.40 million shares or 15.44% of the company’s outstanding common stock.

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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 more details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 118% and beating the market by more than 60 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise rather than large-cap stocks.

Broadwood Capital is a New York-based private investment firm established by Neal C. Bradsher back in 2002. The money manager had worked as a Portfolio Manager at Whitehall Asset Management and Campbell Advisors prior to starting his own shop. As stated by its most recent 13F filing with the SEC, Broadwood Capital manages an equity portfolio with a market value of $587.24 million as of June 30. A little more than a week ago, the investment firm disclosed boosting its stake in BioTime Inc. (NYSEMKT:BTX) to 20.26 million shares (read more details).

We will now turn our focus to STAAR Surgical Company (NASDAQ:STAA), a manufacturer of implantable lenses and delivery systems for the eye. Broadwood Capital believes that the management team of STAAR has improved lately, according to the amended 13D filing. However, the investment firm also suggested that the interests of the company’s Board of Directors are not fully aligned with the shareholders’ interests. At the same time, Broadwood Capital seems to be pleased with the two recently-appointed directors, but the investor reckons that there is still more room for improvement. Let us remind you that William P. Wall, former General Counsel of investment firm Abrams Capital, was appointed to STAAR Surgical’s Board of Directors earlier this month. The shares of STAAR have been on a decline since late-June, partly owing to the weak financial results of the company in the second quarter. The company reported net sales of $18.7 million, which were down 7% year-over-year. Even so, STAAR managed to tighten its loss to $1.6 million from $1.8 million reported in the same quarter a year ago. Aside from Broadwood Capital, William Leland Edwards’ Palo Alto Investors is also bullish on STAAR Surgical Company (NASDAQ:STAA), owning 2.64 million shares as of June 30.

Let’s now provide a brief introduction to the other fund mentioned in the article. Coliseum Capital is private investment firm co-founded by Christopher Shackelton and Adam Gray in December 2005. The firm primarily focuses on long-term investments in both public and private companies. The latest round of 13F filing indicates that Coliseum Capital oversees an equity portfolio worth $295.01 million.

We can move on to Coliseum Capital’s bet, Accuride Corporation (NYSE:ACW), which is a manufacturer of commercial vehicle components in North America. Even though the vehicle industry has been quite strong lately, with the production of trucks and trailers gaining steam during the second quarter, the shares of Accuride have lost more than 36% since the beginning of the year. The strengthening U.S. economy has also injected more dynamism into the vehicle industry, but the manufacturer’s stock performance does not reflect the improving conditions of this industry. Just recently, Accuride Corporate launched a mobile application that enables its current and potential customers to access product information on its wheels and other wheel-end components, in an attempt to lift up its global sales. However, it appears that the company’s Brillion business segment has been putting downward pressure on its operations and stock performance in particular. Accuride anticipates Brillion’s 2015 net sales to be 15% – 20% lower year-over-year, primarily owing to the negative effect of the low-price commodity environment on the demand for Brillion’s oil and gas, agricultural and mining end markets. Meanwhile, Peter Schliemann’s Rutabaga Capital Management is among the largest equity holders of Accuride Corporation (NYSE:ACW) within our database, holding a 2.86 million-share stake.

Disclosure: None