Charles Davidson’s Wexford Capital filed a new Form 4 with the U.S Securities and Exchange Commission on Wednesday, disclosing three transactions conducted over each of the past three days with the result of slashing the fund’s Diamondback Energy Inc (NASDAQ:FANG) holding yet further. Wexford sold off a combined 1.10 million shares in the three transactions, and at an average price of about $71.65. The latest sales bring Wexford’s stake down to just 1.65 million shares. Beyond that, we’ll tak e a look at Wexford’s top new picks from its most recent 13F filing, including Alibaba Group Holding Ltd (NYSE:BABA).
Davidson co-founded Wexford in 1994 and continues to oversee the fund to this day, which manages several separate and strategically unique portfolios. The total value of the fund’s equity portfolio was dramatically lessened during the fourth quarter to just $519.17 million from $1.09 billion at the end of the third quarter. This was partially due to three factors: the pounding that the energy sector took, which constituted more than half of Wexford’s equity portfolio, the fact Wexford closed 76 positions while only opening 14 new ones, and lastly, the fact that it slashed its Diamondback Energy holding, by far its most valuable holding, by 40% during the quarter. Despite that, and the fact Diamondback shares also fell 22% during the quarter, the position actually increased slightly in terms of overall percentage value of Wexford’s portfolio, which demonstrates just how drastically it cut other equities.
Despite that, and the fact Diamondback shares also fell 22% during the quarter, the position actually increased slightly in terms of overall percentage value of Wexford’s portfolio, which demonstrates just how drastically it cut other equities. Diamondback made up 49.54% of the portfolio at the end of the year, up from 49.46%, with 4.30 million shares.
Given the fund’s exposure to energy stocks, it’s not surprising that our methodology predicted Wexford as having one of the worst returns of the third quarter, at -8.1%, though the fund was still calculated as being up 17.7% over the past calendar year. In fact it ranked as the sixth best performing hedge fund we track during the first quarter, with a 21.8% return.
The selloff of so many Wexford positions and the fact it only opened a handful in return make it particularly interesting to note the top 3 of those new picks, as Wexford surely saw something profound in them. As mentioned Alibaba Group Holding Ltd (NYSE:BABA) was one of those, and in fact the top new pick with 118,900 shares. The big move into the Chinese e-commerce giant is somewhat surprising, given the limited investment Wexford makes in the consumer discretionary sector, but it’s top 3 new picks show a clear desire to diversify the portfolio further given the energy situation.
Unfortunately Alibaba has not proven to be the wisest of investments, down 17.75% year-to-date following quarterly results at the end of January that did not impress investors, with growth figures nearly double-digits below estimates. Alibaba did have a strong day on Wednesday however, with shares up nearly 5%, as the company opened its first U.S data center in Silicon Valley as it ramps up its global ambitions.
Unfortunately Alibaba has not proven to be the wisest of investments, down 17.75% year-to-date following quarterly results at the end of January that did not impress investors, with growth figures nearly double-digits below estimates. Alibaba did have a strong day on Wednesday however, with shares up nearly 5%, as the company opened its first U.S data center in Silicon Valley as it ramps up its global ambitions.
Wexford’s second new position was in Hemisphere Media Group Inc (NASDAQ:HMTV), with the fund opening a 710,600 share position last quarter. That amounts to a 5.86% passive position in the company, which we reported on back in January. Hemisphere Media is certainly another diversification prospect for Wexford. The company owns and operates a number of Spanish-language cable properties that air in the United States, Canada, and South America, including the cable movie network Cine Latino, and the Puerto Rican-centric news services WAPA and WAPA America. Hemisphere releases its fourth quarter and 2014 full year results on March 11. Pleasant Lake Partners, managed by Jonathan Lennon was another bullish new investor in Hemisphere Media last quarter, opening a 1.25 million share position.
Lastly is United Continental Holdings Inc (NYSE:UAL), which checked in as the third-most popular airline stock among billionaires at the end of the year. Wexford opened a new 128,500 share position during the fourth quarter, while simultaneously decreasing its holding in Delta Air Lines, Inc. (NYSE:DAL) by 57%, to 209,000 shares. Like most airline stocks, United Continental enjoyed a very strong 2014, up 81.87%, and transportation stocks like United would appear to be the perfect hedge against the energy sector that Wexford may be looking for, as on the other hand, United reportedly looks to hedge itself against fuel costs for the next two years.
David Tepper’s Appaloosa Management was the top United Continental shareholder among our tracked funds at the end of 2014 with ownership of 4.92 million shares. Rob Citrone of Discovery Capital meanwhile opened a new position during the fourth quarter of 1.41 million shares.
Disclosure: None
