Incorporated in 2001, Horseman Capital Management, a London-based fund managed by John Horseman has recently issued its 13F filing for the end of the first quarter of 2015. The filing revealed a total of 23 positions with an aggregate value of over $321.66 million as of the end of the first quarter of 2015, up from $248.40 million a quarter earlier.
Even though Horseman has just filed its 13F and generally all investors disclose their equity portfolios with large delays, their focus on the long-term returns helps to uncover some interesting opportunities by analyzing 13F filings. Our research has indicated that the top 15 small-cap picks of the funds we track, not only outperform their most popular large-cap picks, but even broader market. Based on our back tests, the top small-cap stocks among the hedge funds we track, beat the market by an average of nearly a percentage point per month between 1999 and 2012. Moreover, since we started forward testing the performance of these stocks at the end of August 2012, this strategy has returned 132% through March 2015 and beat the market by nearly 80 percentage points (see more details).
Horseman Capital’s top five picks delivered an average return of 9.7% for the first quarter of 2015, beating the S&P 00 ETF (SPY)’s performance of 0.9% during the same period. Vipshop Holdings Ltd – ADR (NYSE:VIPS), Bank of New York Mellon Corp (NYSE:BK), and Wells Fargo & Co (NYSE:WFC) remained the fund’s top three positions at the end of March.
The fund’s largest stake is represented by Vipshop Holdings Ltd – ADR (NYSE:VIPS), which amasses 13.12% of the fund’s equity portfolio. John Horseman increased the fund’s exposure by 20% during the first quarter to 1.43 million shares valued at $42.21 million. The investment paid off well, with this stock posting solid returns of 50.67% during the first quarter of 2015. Vipshop Holdings Ltd – ADR (NYSE:VIPS), a Chinese e-commerce retailer expects its first quarter of 2015 revenue to increase between 78% to 85% on the year, to $1.25 billion – $1.30 billion. Moreover, in the fourth quarter of 2014, Vipshop Holdings Ltd – ADR (NYSE:VIPS)’s revenues surged by 109% on the year to $1.36 billion. The firm’s net profit increased to $0.12 per share, as compared to $0.05 a year earlier.
Next in line is Bank of New York Mellon Corp (NYSE:BK), in which Horseman Capital holds 999,600 shares worth $40.22 million, constituting 12.51% of the fund’s equity portfolio. While John Horseman raised his stake by 19% during the first quarter of 2015, the stock declined by 0.35% during the same period. Bank of New York Mellon’s fourth quarter of 2014 revenue reported a decline of 3% to $3.67 billion, in year-over-year terms. The adjusted earnings for the same period posted a year on year increase of 7% to $0.58 per share, but below the Zacks Consensus Estimate of $0.60 per share. Bank of New York Mellon Corp (NYSE:BK) paid a cash dividend of $0.17 per share on February 13, 2015 to shareholders of record as of Feb 3, 2015. Among the hedge funds we track, major shareholders in Bank of New York Mellon Corp (NYSE:BK), as of the end of last year, are Nelson Peltz’s Trian Partners owning 28.89 million shares and Jean-Marie Eveillard’s First Eagle Investment Management holding 27.76 million shares.
Wells Fargo & Co (NYSE:WFC) represents the fund’s third largest position, which comprises 11.98% of its equity portfolio, with 708,500 shares worth $38.5 million. For the fourth quarter of 2014, the year on year revenue increased by 4% to $21.4 billion. Net income for the same period surged to $5.38 billion, as compared to $5.37 billion in the same period of 2013. However, Wells Fargo & Co (NYSE:WFC) reported a year-on-year revenue decline of 1.5% to $21.3 billion for the first quarter of 2015. Warren Buffett’s Berkshire Hathaway is among the top shareholders of Wells Fargo & Co (NYSE:WFC), with 463.5 million shares valued at $25.4 billion, as of end of the fourth quarter of 2014. Other major stockholders are Ken Fisher’s Fisher Asset Management and Tom Russo’s Gardner Russo & Gardner with 18.5 million shares and 14.6 million shares respectively, for the same period.
Horseman’s stake in Capital One Financial Corp. (NYSE:COF), a diversified financial services holding company, amasses 10.2% of its equity portfolio. Horseman Capital holds 416,100 shares valued at $32.8 million, as of the end of the first quarter of 2015. Even though the fund increased its exposure in Capital One Financial Corp. (NYSE:COF) by 33% during the first three months of 2015, the company’s stock depreciated by 4.14%. In addition, for the first quarter, Capital One’s bad loan provisions increased to $935 million from $735 million, as compared to the same period a year earlier. Therefore, the company reported revenue of $5.65 billion and a net income of $2 per share, versus the estimates of $5.7 billion in revenue and EPS of $1.88. Ric Dillon’s Diamond Hill Capital was among the shareholders bullish on Capital One Financial Corp. (NYSE:COF) at the end of last year, holding 2.7 million shares.
John Horseman decreased the fund’s exposure in Alibaba Group Holding Ltd (NYSE:BABA) by 75%, during the first quarter, holding 6,300 shares valued at $524,000. Accordingly, Alibaba Group Holding Ltd (NYSE:BABA)’s stock depreciated by 19.92% during the first quarter of 2015, amid counterfeit issues and analyst downgrades. The Chinese e-commerce firm has been facing allegation from the US law firms and the Chinese government for selling counterfeit goods on its online platform. Dan Loeb’s Third Point and Rob Citrone’s Discovery Capital Management are among the major shareholders in Alibaba Group Holding Ltd (NYSE:BABA), holding 10.0 million shares and 9.3 million shares respectively, as of the end of the fourth quarter of 2014.
Disclosure: none
