Robert Jaffe is the founder, chairman, and CIO of Force Capital Management. He founded the company in 2002. Prior to that, Mr. Jaffe was a founding partner of CJS Capital Management. Mr. Jaffe previously worked as a portfolio manager and director of research at Steve Cohen’s SAC Capital Management. He holds a B.S. in Economics from Cornell University and an M.B.A. from Harvard Business School.
According to the latest 13F submission made to the SEC on May 13, Force Capital Management owns a total of 38 stocks on its portfolio valued at $330 million as of March 31st, 2011 (the fund’s 13F assets rose by almost 48% since the previous quarter, $223 million at the end of 4Q2010). Force Capital has sold five holdings, converted call options in Bank of America (BAC) and Sears Holdings (SHLD) into stocks and bought 13 new holdings during the first quarter of 2011. A summary table of Force Capital’s activities is below.
CompanyName | Ticker | Value | Activity | Return |
BANK OF AMERICA Call Options |
| Sold Out | -15.2% | |
CITIGROUP INC |
| Sold Out | -9.5% | |
GENERAL GROWTH PPTYS INC |
| Sold Out | 7.3% | |
GOLDMAN SACHS GROUP INC |
| Sold Out | -15.1% | |
ISTAR FINANCIAL INC |
| Sold Out | -11.3% | |
LOCKHEED MARTIN CORP |
| Sold Out | -4.9% | |
SODASTREAM INTERNATIONAL |
| Sold Out | 29.6% | |
SEARS HOLDINGS Call Options | 31821 | -43.38% | -17.4% | |
PENNEY J C CO INC | 12008 | -39.16% | -7.9% | |
LAMAR ADVERTISING CO | 3897 | -36.77% | -23.0% | |
CROWN CASTLE INTERNATIONAL | 2051 | -26.41% | -2.2% | |
FOSTER WHEELER AG | 6019 | -25.93% | -11.7% | |
SAUER DANFOSS INC | 978 | -25.87% | -0.3% | |
SCHOLASTIC CORP | 1352 | 0.00% | -1.9% | |
UNITED CAPITAL CORP | 5875 | 0.00% | -8.6% | |
FELCOR LODGING TRUST INC | 1797 | 3.43% | -4.1% | |
ENTERTAINMENT PROPERTIES | 230 | 3.64% | 0.7% | |
COPART INC | 21669 | 4.12% | 2.5% | |
REIS INC | 1329 | 13.85% | 24.7% | |
EAGLE MATERIALS INC | 9232 | 17.35% | -6.9% | |
BANK OF AMERICA Warrants | 1007 | 24.13% | -15.2% | |
EMMIS COMMUNICATIONS | 514 | 27.25% | 3.0% | |
TECHTARGET INC | 512 | 30.68% | -19.1% | |
PENNSYLVANIA REAL ESTATE | 5421 | 33.30% | 15.3% | |
E X C O RESOURCES INC | 4863 | 38.47% | -3.0% | |
FIRST INDUSTRIAL REALTY TR | 21955 | 45.74% | -0.3% | |
S L GREEN REALTY CORP | 16183 | 47.11% | 14.9% | |
AUTONATION INC DEL | 20840 | 68.34% | -3.7% | |
UNION PACIFIC CORP | 10983 | 76.18% | 4.4% | |
SHUTTERFLY INC | 23682 | 84.61% | 10.8% | |
RAIT FINANCIAL TRUST | 2177 | 121.25% | -13.4% | |
SCHOLASTIC CORP | 9102 | 192.70% | -1.9% | |
BANK OF AMERICA CORP | 27913 | 276.28% | -15.2% | |
ALEXANDER & BALDWIN INC | 96 | New | 3.0% | |
AMAZON COM INC | 1603 | New | 7.5% | |
BANKUNITED INC | 2110 | New | -4.1% | |
CHARTER COMMUNICATIONS | 9670 | New | 13.4% | |
COHERENT INC | 2301 | New | -7.2% | |
COMPUCREDIT HOLDINGS | CCRT | 369 | New | -48.2% |
EQUINIX INC | 18484 | New | 10.5% | |
GAP INC | 30831 | New | -19.6% | |
HOVNANIAN ENTERPRISES INC | 731 | New | -28.6% | |
ISTAR FINANCIAL INC | 4356 | New | -11.3% | |
IRON MOUNTAIN INC | 8479 | New | 6.3% | |
SEARS HOLDINGS CORP | 1777 | New | -17.4% | |
TRAVELCENTERS AMERICA LLC | 2218 | New | -32.2% | |
ENDURANCE SPECIALTY HOLD | 4206 | New | -18.1% |
Force Capital’s largest purchase was GAP Inc. (GPS) in which it bought 1.3 million shares valued at approximately $31 million at the end of March 31st. GAP has lost almost 20% in value since the end of March 31st. Edward Lampert’s ESL Investments has a long position in GAP that was worth over $600 million at the end of March 31st and has increased its GAP holdings by 8.54% since the end of last year. Cliff Asness’ AQR Capital Management and David Gallo’s Valinor Management LLC are the other two major hedge funds that have significant long positions in GAP.
Force Capital’s second largest purchase was Equinix (EQIX) in which it bought 202,900 shares valued at over $18 million at the end of March 31st. Equinix has gained 10.5% in value since the end of the first quarter. Stephen Mendel’s Lone Pine Capital has a significant position at Equinix with over 4 million shares valued at approximately $368 million at the end of March. Lone Pine did not change its position at Equinix since the end of last year. Jeffrey Tannenbaum’s Fir Tree fund and Eric Bannasch’s Cadian Capital own significant amount of shares at Equinix as well.
Force Capital’s third and fourth largest new purchases during the first quarter of 2011 were Charter Communications (CHTR) and Iron Mountain (IRM), respectively. The value of Charter Communications on Force Capital’s portfolio was $9.7 million and the value of Iron Mountain was $8.5 million at the end of March. Both Charter Communications and Iron Mountain have showed positive performances since the end of March and have gained 13.4% and 6.3% in value, respectively. Howard Marks’ Oaktree Capital Management is by far the heaviest investor in Charter Communications with almost 20 million shares valued at approximately $1 billion on March 31st. Oaktree did not change its position at Charter Communications since the end of 2010. Charter Communications recently traded at $57.78 per share. Doug Silverman’s Senator Investment Group and Michael Johnston’s Steelhead Partners also own roughly 2 million shares each, valued at approximately $100 million at the end of March. On Iron Mountain’s side, we see Richard Breeden’s Breeden Capital Management being bullish on the stock and expanding its ownership of Iron Mountain by 1.52% in the first quarter of 2011. Breeden has over 3 million shares valued at $94 million at the end of March. Richard Perry’s Perry Capital and David Abrams’ Abrams Capital Management have opened new positions in Iron Mountain and bought 2.5 million and 2 million new shares respectively during the first quarter of 2011.
While Force Capital made some good purchases on a few new holdings as mentioned above, it also made some bad ones. On a weighted average basis, Force Capital has lost most on GAP purchase. Travelcenters America LLC (TA), Sears (SHLD), Endurance Specialty (ENH), and Istar Financial (SFI) were the other major bad bets on behalf of Force Capital. In terms of lost opportunities, Force Capital lost the opportunity to make a 30% return on Sodastream (SODA) by selling it in the first quarter of 2011.
Force Capital's new stock picks lost 6.3% since the end of March, vs. a loss of 1.6% for the S&P 500 index. We believe this is a good opportunity for investors to imitate Force Capital's new stock picks at a 6% discount to what is paid by Robert Jaffe.
Disclosure: I am long C.
