Tracking Small-Cap Super Investor MSD Capital - Q2 Update

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 |  Includes: ABG, DIN, PVH, TSQ, WAIR, WEX
by: Unconventional Capital Wisdom

Summary

MSD Capital is a vehicle for Michael Dell to "diversify" his funds away from Dell.

MSD Capital runs a highly concentrated long portfolio of public small-cap companies.

A new material purchase for WAIR indicates shares currently are undervalued.

Investors can benefit from tracking the portfolio of not only large and mid-cap super investors, but also small-cap super investors such as MSD Capital. The firm helps Michael Dell diversify his wealth away from his large equity ownership in Dell Computers. While the firm manages somewhere around $12 billion and holds many other alternative assets, the long-only portfolio is extremely concentrated to a few small-cap companies and has always been that way since the earliest filings in 2000. The high concentration should not be any surprise, since Michael Dell understands the power of putting all his eggs into one basket, Dell, and letting a few high quality companies compound the capital for you. We would think that Michael Dell and the managing partners at MSD Capital would agree with Warren Buffett's statement that:

I'm a better investor because I am a businessman and a better businessman because I am an investor.

A little background on Co-Managing Partners of MSD found at their website:

Glen Fuhrman -

Mr. Fuhrman is Co-Managing Partner of MSD and Co-Founder of the firm. Prior to forming MSD, he worked from 1988 to 1998 at Goldman, Sachs & Co., where he was a Managing Director and Head of the Special Investments Group. While at Goldman, he served on the Investment Committees of Goldman Sachs' Private Equity Partners I, II & III, L.P., a series of multi-manager private equity partnerships aggregating over $3 billion, and on the Boards of Directors of the Stone and Bridge Street Funds, the private investment funds for the partners and employees of Goldman Sachs.

John Phelan -

Mr. Phelan is Co-Managing Partner of MSD and Co-Founder of the firm. Prior to forming MSD, he was a Principal from 1992 to 1997 at ESL Investments, a Greenwich, Connecticut based investment firm. At ESL, John was responsible for ESL's Special Situation Investments and helped grow the firm from $50 million to over $2.0 billion in assets under management. Prior to ESL, John was Vice President in charge of Acquisitions (Western Region) for the Zell-Merrill Lynch Real Estate Opportunity Funds. John began his career at Goldman, Sachs & Co., where he worked from 1986 to 1988 as an Analyst in the Investment Banking Division.

MSD Capital holds only 5 positions in its public long portfolio as of the end of Q2 2014. It is also noted that in July the firm filed a 13G for its purchase of Townsquare Media Inc (NYSE:TSQ).

New Positions

Wesco Aircraft Holdings (NYSE:WAIR) - Wesco Aircraft Holdings was purchased at an average price of $20.5 a share during the second quarter. This holding is the fund's third largest at 18.7% of the long portfolio. We are not surprised that MSD purchased Wesco Aircraft Holdings last quarter, since WAIR is one top idea that we have written about here. It is highly likely that the fund has been a net buyer as the share price has fallen after the recent earnings call.

Positions Added To

PVH Corp (NYSE:PVH) - Has been a part of the MSD portfolio since Q2 2012. The position was increased three percent from the quarter prior. The position makes up 16% of the long portfolio, but is nearly half the size it was when originally purchased.

No Change

DineEquity (NYSE:DIN) - Purchased in Q2 2008 for ~$37 a share and the share price has more than doubled since, however, the position remained the same from the prior quarter.

Positions Reduced

Asbury Automotive Group (NYSE:ABG) - Purchased Q4 2008 for ~$3.5-$4.5 a share which has turned out to be over a 14 bagger. Note MSD has only slightly fewer shares than it had in 2008, so the position has grown from ~4% of the portfolio to 28%. In the recent quarter MSD reduced the stake ~7%.

Wex Inc (NYSEMKT:WEX) - Purchased in Q2 2008 for ~$25 a share and has been actively scaled back the last number of years down to 1/4 the position's original size. The position was reduced 14% to ~9% of the long portfolio.

Complete Holdings Found Here

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article is meant for instructional purposes and not meant as a recommendation to buy or sell. The only kind of intelligent investing is through your own due diligence.