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Tim Flannery founded Copia Capital in May 2002. Copia Capital has $550 in assets under management and is a market-neutral equity hedge fund. Copia Capital spun-off from FrontPoint Partners in 2010 and focuses on energy, materials, industrials, and utilities sectors. Tim Flannery, Dean Du Monthier, David Grumhaus and George Shiau are in Copia’s senior investment team since its inception. Previously Flannery worked at Trove Partners, focusing on energy and utilities. Prior to that Flannery was with the consulting firm Metzler & Associates working on electric and gas utility industry. He received an MBA degree from the University of Chicago.

Copia Capital had 121 stocks in its 13F portfolio. Forty six of these stocks were constituents of the S&P 500 index, and they lost 1.4% during the second quarter, underperforming the S&P 500 index by 1.5 percentage points. Copia’s largest new stock positions might have performed better, though. Here is how Flannery’s 10 biggest new positions performed:

CompanyName

Ticker

Value (x1000)

Return

PETROHAWK ENERGY CORP

HK

8067

0.5%

AMERICAN ELECTRIC POWER CO INC

AEP

6033

8.6%

SPECTRA ENERGY CORP

SE

5707

1.8%

NORTHWESTERN CORP

NWE

5626

10.5%

P N M RESOURCES INC

PNM

5576

13.2%

ANADARKO PETROLEUM CORP

APC

5448

-6.2%

SWIFT ENERGY CO

SFY

5190

-12.7%

PLAINS EXPLORATION & PROD CO

PXP

5160

5.2%

ROCK TENN CO

RKT

4542

-4.1%

CALPINE CORP

CPN

4468

1.6%

Tim Flannery’s 10 largest new positions gained 2.1% during the second quarter, beating the S&P 500 index by 2 percentage points. His top 5 stock picks performed even better, returning 6.4%. His best performing stock pick was PNM Resources (NYSE:PNM) in this group. Israel Englander is the most bullish hedge fund manager about PNM. Englander’s Catapult Capital is also among the Northwestern Corp (NYSE:NWE) investors.(Check out Englander’s bullish stock picks here). Two other hedge funds were among PNM and NWE investors: Glenn Dubin’s Highbridge and Jim Simons’ Renaissance. Jim Simons’ largest stock picks managed to beat the S&P 500 index by 2.8 percentage points during second quarter (Check out Jim Simons’ largest picks).

Another utility stock that performed better than most S&P 500 constituents is American Electric Power (NYSE:AEP). Falnnery’s second largest new holding returned 8.6% in the second quarter. John Levin’s Levin Capital, Israel Englander’s Millennium, and Steve Cohen’s SAC Capital have large positions in AEP. Flannery had also more than $5 Million in Plains Exploration & Production (NYSE:PXP), which returned 5.2%. PXP outperformed the energy sector by a large margin in the second quarter. Energy stocks were among the top losers due to the decline in energy prices. Steve Cohen had more than $180 Mıllion in the stock. Legendary oilman T. Boone Pickens also had a large position in PXP (Check out Pickens’ top energy picks here).

Flannery’s top positions performed extremely well but his smaller stock picks performed couldn’t match this performance. Here is how his next 10 large new stock picks performed:

CompanyName

Ticker

Value (x1000)

Return

ALLIANT ENERGY CORP

LNT

4467

5.6%

OCEANEERING INTERNATIONAL INC

OII

4244

-9.3%

E N S C O PLC

ESV

4096

-7.3%

SCHNITZER STEEL INDUSTRIES INC

SCHN

4041

-11.4%

CIMAREX ENERGY CO

XEC

3946

-21.9%

PIONEER DRILLING CO

PDC

3925

10.4%

UNITED STATES STEEL CORP NEW

X

3722

-14.6%

CHESAPEAKE ENERGY CORP

CHK

3718

-11%

NORANDA ALUMINUM HOLDING CORP

NOR

3315

-6%

KANSAS CITY SOUTHERN

KSU

3235

9%

These 10 stocks lost 5.7% during second quarter, in line with the losses in the energy sector. This shows two things. First, some hedge fund managers’ highest conviction stock picks perform better than their other stock picks. This is especially more valid when the hedge fund invests in dozens of stocks. Second, it may be possible to devise a strategy that will extract hedge funds’ high conviction stock picks and beat the index funds on the average. We like Flannery’s highest conviction stock picks in the energy, materials, industrials and utilities sectors in which he is an expert. We believe investors can outperform sector ETFs by focusing on Copia’s high conviction stock picks.

Disclosure: I am long CHK.

Source: Copia Capital's High Conviction New Stock Picks