If Smaller Names Are Your Game, Watch ACK Asset Management

Includes: ATRO, CLH, CSU, KEX, LBY
by: Insider Monkey

By Adam Barnett

ACK Asset Management, founded and managed by Richard S. Meisenberg, specializes in small-cap and mid-cap equities. A broad economic outlook, a long/short strategy, and an eye for catalysts are the underlying norms of the fund's investment philosophy. The hedge fund recently filed its 13F, describing some of its main investments for the quarter. A quick look at the top 5 equity positions of the fund can be a good starting point for your own research. See the original 13F here, and it's important to note that empirical analyses have revealed that piggybackers can beat the market if they know where to look (discover the secrets of this strategy).

Let's get started

At the time of the 13F filing, the fund's largest holding was in glass tableware manufacturer Libbey Inc. (NYSEMKT:LBY). The fund held a stake of 852,000 shares of common stock valued at about $16.47 million, a rise from 721,333 stocks in the prior quarter. Net income grew to $2.0 million during 2013 quarter, rising from $0.6 million in the corresponding quarter of the prior year. This works out to a solid EPS of $0.37. Price action during 2013 has been volatile but bullish, with the stock trading at $20.58 at the time of writing, having touched its 52-week high of $21.15 last week. However, its P/E ratio is at a very high 55.57 times trailing earnings.

Next in line is Clean Harbors Inc. (NYSE:CLH), an environmental services and waste disposal company. According to the 13F, the fund held a stake of 211,000 shares of common Clean Harbors stock during the quarter, a slight fall from 218,300 shares held in the prior quarter. First quarter 2013 net income was $10.5 million, or $0.17 per diluted share, falling $32.0 million, or $0.60 per diluted share, in the corresponding quarter of 2012; the fall was mainly caused by an acquisition. Price action for 2013 has been disappointing for bulls, with the stock retreating from its 52-week high of $64.40 in early April to around $54 at the time of writing. Its P/E Ratio is currently quite high at 27.64, but a forward P/E of 20.26 indicates that shares aren't overly expensive if analyst estimates hold.

Tank barge operator Kirby Corp. (NYSE:KEX) is the next largest holding in ACK's 13F, with 143,010 shares held worth about $10,983,000 at the time of filing. Notably, this seems to be a new position for the fund, with no holdings of Kirby reported in the 13F of the prior quarter. Kirby reported $1.00 earnings per share during 2013's Q1, a rise from $.91 earned in the first quarter 2012. Price action has been fairly bullish, with the stock currently trading at about $76.70, not far from its 52-week high of 77.32. Kirby's P/E Ratio is currently 20.05, while its forward P/E is forecast to trend downward to a cheaper 18.17.

Moving from the sea to aerospace, aerospace lighting and electronic manufacturer Astronics (NASDAQ:ATRO) is the next largest holding listed in the 13F. ACK holds 351,900 shares of common stock, worth just under $10.5 million at the time of filing. This is another new position for the fund. Astronics reported quarterly sales of $74 million for the first quarter, up 13.6% from the corresponding quarter of 2012; diluted earnings per share were $0.56, up from $0.40 in the 2012 first quarter. The market has reacted positively to the earnings news with stock rallying from about $26 to touch its 52-week high of $33.32 in the past fortnight, before falling back slightly to its current price of $32.37. A forward P/E of 16.67 indicates that there's some value here.

Finally we come to nursing care provider Capital Senior Living Group (NYSE:CSU), with ACK holding 386,989 shares of common stock worth about $10.2 million at the time of the 13F filing. This is an increase in stake from the prior quarter, when the fund held 378,800 shares. The stock displayed a strong uptrend from mid-2012 to mid-March 2013, touching its 52-week high of 27.90, before retreating and forming what may be a consolidation pattern, with the price at the time of writing being $25.84. During the 2013 first quarter, the company reported that Adjusted Cash From Facility Operations increased 44.9% to $9.7 million, or $0.35 per share, an increase of $0.10 per share by comparison with the corresponding quarter of the prior year. Revenue also rose during the quarter - an increase of 19.4% to $86.2 million - over $14.0 million when compared to the first quarter of 2012.

Final thoughts

The top five equity holdings described in the ACK Asset Management 13F represent a highly diverse group of mid- and smaller cap companies, with a number of new positions initiated across the past few quarters. If your interest is in smaller companies, then all five of these stocks are worth your consideration.

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, Adam Barnett, 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.