By: Andrei Braghiş
Bluefin Investment Management is a value-oriented hedge fund founded and managed by Brian K. Russell. During the first quarter of 2013, they have made important changes in their equity portfolio, which can be approximated thanks to their latest 13F filing with the SEC. The fund's new lead equity investment is in a biotech player, closely followed by a popular apparel stock. Let's take a closer look at those companies and their financials. See the original 13F here.
Why do that?
It's important to track hedge fund sentiment, because on the whole, their best picks have been shown to outperform the market by as much as 18 percentage points a year. Best of all, retail investors can capitalize on this phenomenon, but they have to know where to look first (discover the secrets of this strategy here).
The biggest position in Bluefin's latest 13F is Sequenom (SQNM), a biotechnology firm. The hedge fund has increased its stake in Sequenom by 20% quarter-over-quarter. The reported value of their investment is approximately $10 million. The company's stock price has been in a downtrend since the start of the year and has fallen 28%, currently oscillating around a value of $3.50. As expected, then, its financial performance was not brilliant either. The company reported a loss and failed to meet the Wall Street estimates in its latest quarterly financials. Sequenom posted a loss of $0.29 per share and revenues of $33.67 million. Analysts, however, have a more positive outlook for the company's next quarter, predicting a loss of $0.23, while revenues are still expected to grow.
Russell has increased his fund's stake in Michael Kors Holdings (KORS) by 47% and has reached a reported value of $8.5 million. The company engages is marketing and distribution of men's and women's apparel. Michael Kors' stock price has advanced 13% in 2013 and is near $60 per share at the time of this writing. Michael Kors is traded at a trailing Price to Earnings ratio of 34.71 and has a forward P/E ratio of 24.27, signaling the market's belief that the company will increase its revenues and earnings over the intermediate term. The stock's beta of 2.57 indicates augmented sensitivity to Mr. Market, though it's near apparel industry norms. Wall Street has a good opinion of the stock; five analysts recommend it as a Buy, and another nine analysts see it as a Strong Buy.
Bluefin has reduced their exposure to Dicks Sporting Goods (DKS), decreasing their stake in the sports and fitness retailer by 16%. The value of the rest of the holding was reported at $8.4 million. Still, the stock price of Dicks Sporting Goods has grown by 11% so far this year. Shares are traded at a trailing Price to Earnings ratio of 22.28 and a forward P/E ratio of 15.55, with the market expecting the company to register higher earnings going forward. The company pays a dividend of $0.50, which represents a tiny yield of 0.1%. Analysts have a good opinion of the stock, recommending it mainly as a buy or strong buy. They estimate the company will register decent earnings growth, predicting EPS of $0.70 and revenues of $1.59 billion two quarters from now-a 10.5% increase from last year's Q2.
The stock price of DexCom (DXCM), meanwhile, has been in an uptrend in 2013, though Bluefin slightly reduced their exposure last quarter. The market has a good sentiment about this stock, although DexCom posted losses for the first quarter. They registered losses of $0.16 per share and revenues of $29.6 million, beating Wall Street estimates of losses of $0.17 per share and revenues of $28.33 million. DexCom's stock has a beta of 0.49, making it a rather nice stock to pair with some of the higher-beta investments mentioned above. Analysts estimate revenues to grow by 32% in the next quarter and losses of $0.16 per share.
Last but certainly not least is ExactTarget (ET), a small-cap software company. Russell and his team have decided to halve their holdings of the stock, reducing it to approximately 350,000 shares, with a reported value of $8.1 million. Since the start of 2013, the stock's price had risen to a high of $24.50 in late March/early April but had entered a correction before bouncing back a bit in the last two weeks. Shares are currently traded at a price of $22. ExactTarget is very popular among analysts, who almost wholly recommend it as either a Buy or Strong Buy, setting a price range of $28-$39 on shares. Earnings are estimated to be slightly in the red for the time being, but revenues are expected to grow 31% (qoq) to $91.09 million in the next quarter.
Bluefin has a balanced, growth-oriented equity portfolio. The top five positions are highly regarded by market participants and analysts, and are expected to have a good financial performance moving forward, at least from a top line standpoint. We would recommend keeping tabs on Sequenom, as it is a rather safe investment with a good growth potential. Another stock worth noting is Dicks Sporting Goods (to continue preparing for 13-F filing season, continue reading here), though each member of this group should be watched.