Florida based Intrepid Capital Management was founded in 1995. Mark Travis is a founding partner and head portfolio manager there. He's responsible for operations and investment decisions of the balanced, high yield fixed income portfolios and the Intrepid Capital, L.P. hedge fund. Travis received his BA in Economics from Georgia University. Prior to founding Intrepid, he worked at the Consulting Group of Smith Barney & its predecessor firms for 10 years. He has over 25 years of asset management experience and is a member of the CFA Institute.
Intrepid Capital Management invests in equity and fixed income markets in the U.S. For its equity investments, it prefers value stocks and applies bottom-up stock picking approach. Travis claims his portfolios are less risky than its peers and there's a very low correlation with other managers. He is a relatively more conservative investor than are his peers. His Intrepid Capital Fund (ICMBX), which has 5-star Morningstar rating, returned 8.8% compared to 1.7% gain by the SPY on a five year annualized basis.
He disclosed his three favorite picks on December 9 on TV. The stocks were American Greetings (AM), CoreLogic (CLGX) and Teleflex (TFX). AM lost 1.63%, CLGX returned 13.61% and TFX returned 13.16% since then. The average return of his 3 favorite picks is 8.38% - 1.46 percentage points higher than SPY. This is a great example showing how fund managers’ top picks can outperform the market.
In a recent interview, Travis said he's in favor of companies that generate free cash-flow yields and he disclosed his favorite picks as CSG Systems (CSG), Regis (RGS) and Potlatch (PCH). According to the latest 13F fillings of Intrepid, he has those stocks in his portfolio and PCH is his 6th largest position. Below are Intrepid’s other positions at the end of December 2010.
1. Tidewater Inc. (TDW): Travis had $33.5 Million in TDW at the end of December. The stock returned 3.27% since December, slightly underperforming SPY’s 5.22% return. Stock holdings are almost unchanged since September.
2. Aaron’s, Inc. (AAN): Intrepid had $31.6 Million of AAN shares. The investment returned -2.7% over the last 40 days. Travis increased his AAN holdings by 28% during the last quarter of 2010.
3. EPIQ Systems, Inc. (EPIQ): Travis had $27.9 Million of EPIQ. This pick returned -2.48% over the last 1.5 months, underperforming the SPY by 7.7 percentage points. Travis increased his EPIQ holdings by 16.6% during the last quarter.
4. FTI Consulting, Inc. (FCN): Intrepid had 742,000 shares of FCN at the end of December 2010. Stock holdings increased by 193.78% during the fourth quarter of 2010. The stock lost 0.35% since then.
5. Teleflex Inc. (TFX): Travis added Teleflex to his portfolio in the last quarter of 2010. Currently he has $25.6 Million invested. The stock gained 9.94% since then, outperforming the SPY by 4.72 percentage points.
6. Potlatch Corporation (PCH): This stock is one of Travis’ best picks. He owned $24.5 Million of Potlatch shares at the end of December. PCH gained 17.36% since then. Stock holdings increased by 187% during the last quarter.
7. ManTech International Corporation (MANT): Intrepid Capital Management held $23.7 Million MANT shares on December 31st 2010, almost unchanged since the end of the September. ManTech gained 1.67% since then, underperforming the SPY by 3.55 percentage points.
8. Federated Investors, Inc. (FII): $23.5 Million in Federated Investors stock gained 4% since the end of December, beaten by the market like most of Travis’ top holdings. Stock holdings increased by 10% during the last quarter of 2010.
9. Bio-Rad Laboratories, Inc. (BIO): Travis had almost $23 Million of BIO shares. He increased his holdings during the fourth quarter by 11%. The stock returned 4.3% since the end of December.
10. Bill Barrett Corp. (BBG): Mark Travis had $22 Million in shares of Bill Barrett. The stock lost 4.89% since the end of December. Stock holdings are almost unchanged
Only two of Travis’ top 10 positions managed to beat the market. The average weighted return since the end of December is 2.84% vs. 5.22% return for the SPY. Mark Travis had 72 stocks in his portfolio. During the last quarter of 2010, he completely sold 20 stocks and added 16 stocks to his portfolio. The five largest new picks are Teleflex (TFX), CoreLogic (CLGX), Central Garden & Pet (CENT), Microsoft (MSFT) and Convergys (CVG). Whitney Tilson is extremely bullish about Microsoft, expecting a 25% return in 2011. Billionaire Leon Cooperman is also another hedge fund manager with a large MSFT position.
Disclosure: I am long SPY, MSFT.