Hedge Fund Pacifica Capital's Top Stock Picks

Includes: BRK.B, DFZ, GS, SBUX, WFC
by: Insider Monkey

By: Alex Oleinic

One of the hedge funds we track is Pacifica Capital Investments. Even though it is not a big fund, having an equity portfolio worth $149.4 million, it is important to follow its latest moves. Between 1998 and 2010, Steve Leonard, the founder of Pacifica Capital, managed to post returns of 12.2% each year, while the S&P 500's annual return was 1.8%. One of the ways to follow the activity of Pacifica Capital is by looking at the fund's 13F filings with the SEC. Let's look at the first quarter holdings. See the original 13F here.

This is important because...

Why do we follow the activity of different hedge funds? The answer is simple: it can benefit average investors by watching hedge fund sentiment (learn the secrets of this strategy here).

Pole Position

Goldman Sachs (NYSE:GS) is the largest holding in terms of value in the Pacifica Capital 13F. The fund disclosed a $30.5 million stake, which contains 207,106 shares. In the previous filing, the position represented 210,176 shares, worth $26.8 million. The stock of Goldman Sachs sports a forward P/E of 9.7x. For the first three months of 2013, Goldman Sachs posted diluted EPS of $4.29 per common share, against $3.92 reported a year earlier. In terms of market cap, Goldman Sachs, whose market cap amounts to $68.36 billion, is the leader among companies in the diversified investments industry.

Berkshire Hathaway (NYSE:BRK.B) is the next on the list with a $28.8 million position in the Pacifica Capital 13F portfolio. The fund owns 276,026 shares of the company, down from 276,576 shares held at the end of December. The value of the stake increased from $24.8 million in the previous 13F. Over 60 funds from our database were bullish on the holding company Berkshire Hathaway in the previous round of 13F filings. The net earnings attributable to shareholders of Berkshire Hathaway increased to almost $4.9 billion in the first quarter of 2013, from $3.2 billion a year earlier.

The best of the rest

Pacifica Capital also disclosed a $22.1 million position in Starbucks (NASDAQ:SBUX), up from $20.8 million reported in the previous 13F. The fund currently owns 387,800 shares of Starbucks, compared to 388,480 shares held at the end of last year. The market cap of Starbucks amounts to $47.24 billion, which is the 15th largest among companies from the services sector. The company sports a forward P/E of 24.0x and has a year-to-date return above 17%.

We must also mention Wells Fargo (NYSE:WFC), which is represented in the equity portfolio of Pacifica by a holding of 456,939 shares, worth $16.9 million. The value of the stake increased since the end of last year when it totaled $15.6 million, but the number of shares decreased from 457,139. The stock of Wells Fargo has a year-to-date return of 12.8%, slightly bellow the overall YTD return of all U.S banks, which amounts to about 13%, according to data from Morningstar. According to our database, 80 funds, including Pacifica Capital, were invested in Wells Fargo at the end of 2012.

Last but not least is R.G. Barry (NASDAQ:DFZ). Mr. Leonard's fund disclosed owning 1,117,974 shares of the company, slightly more than 1,119,474 reported in the previous filing. The value of the holding, however, went down to a bit less than $15 million, from $15.9 million. Sporting a P/E of 12.4x, R.G. Barry has the 13th highest P/E in the apparel footwear & accessories industry. The year-to-date return of R.G. Barry's stock amounts to just above 2.70%.

Final thoughts

Steve Leonard and his fund Pacifica Capital took some big steps last quarter; at the end of March, the 13F portfolio of Pacifica totaled $149.4 million, surging from some $133.9 million at the end of 2012. Even though the equity portfolio of the hedge fund is not a big one, containing 13 positions, a number unchanged during the first three months of the year, the companies in it are from various sectors and industries.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: This article is written by Insider Monkey's writer, Alex Oleinic, and edited by Jake Mann. They don't have any business relationships with any of the companies mentioned in this article and they didn't receive compensation (other than from Insider Monkey and Seeking Alpha) to write this article.