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Coliseum Capital Management is a New York-based hedge fund. The fund is co-founded by 46-year-old Adam Gray and 31-year-old Christopher Shackelton. The fund has approximately $150 million in its 13F portfolio and is known for taking highly concentrated positions in stocks.

During the first quarter of 2011, Coliseum exited two of its large holdings, Domino’s Pizza Inc (NYSE:DPZ), and Vital Images Inc (NASDAQ:VTAL). At the beginning of the year, Dominos Pizza was a 9% position, and Vital Images a 4% position in the portfolio.

Coliseum was unlucky to have sold Vital Images in the first quarter as the stock gained nearly 40% since the beginning of April, as it agreed to be bought by Toshiba Medical Systems. The fund also missed a big run in Domino’s Pizza, as the stock price of the pizza chain appreciated an impressive 26% since the start of the second quarter due to strong financial results.

Here are Coliseum’s top stock picks at the end of March:

CompanyName

Ticker

Value (x1000)

Activity

Return

DOMINOS PIZZA INC

DPZ

Sold Out

26%

VITAL IMAGES INC

VTAL

Sold Out

39%

BENIHANA INC

BNHN

1960

0%

-4%

BENIHANA INC

BNHNA

12370

0%

-5%

RURAL METRO CORP

RURL

53547

0%

1%

CASH STORE FINL

CSFS

26374

27%

-35%

BUILDERS FIRSTSOURCE

BLDR

8171

28%

-40%

MAC GRAY CORP

TUC

11741

71%

-15%

SERACARE LIFE SCIENCES

SRLS

3803

73%

-15%

CASUAL MALE RETAIL GR

CMRG

1389

New

-26%

L H C GROUP

LHCG

16448

New

-39%

WET SEAL INC

WTSLA

11278

New

-1%

At the end of March 31, Coliseum Capital had 36% of its portfolio invested in Rural Metro Corp (NASDAQ:RURL), a company that provides ambulance and private fire protection services. This investment turned out to be a home run for the fund as toward the end of the quarter, private equity firm Warburg Pincus offered to buy the company for 37% premium in cash. The acquisition was completed in the second quarter.

The second largest position for the fund on March 31, was Cash Store Financial Services (CSFS). This accounted for roughly 18% of the portfolio at the end of the quarter. Coliseum had added to its CSFS holdings during the March quarter by 27%. Cash Store Financial Services operates primarily in Canada, and the United Kingdom. It acts as a broker to facilitate short-term advances and provide other financial services. The stock has a market cap of approximately $165 million. It has lost 35% since the start of the second quarter. In February, Coliseum disclosed an 11% stake in the company. The fund has added to its CSFS holdings in the second quarter.

Coliseum Capital had nearly 10% of its portfolio in the Japanese style restaurant operator Benihana Inc (NASDAQ:BNHNA). The fund recently engaged in a proxy fight with the management and won a board seat in the company. On June 24, it owned 9.5% stake in Benihana’s common stock. The stock has lost 5% since the start of April. Roark, Rearden & Hamot Capital Management also has large holdings in this stock.

The fund initiated a couple of aggressive new positions in the March quarter. That includes LHC Group (NASDAQ:LHCG), which provides post-acute healthcare services to Medicare beneficiaries in rural markets and specialty retailer Wet Seal (WTSLA).

At March 31, Coliseum Capital had $16.5 million representing 11% of the portfolio in LHC Group. LHC Group has a market cap of approx. $330 million. It has lost nearly 40% of its value since April. Royce & Associates is a big investor in the stock (check out Royce & Associates’ holdings here).

Wet Seal accounted for 8% of Coliseum Capital’s portfolio at the end of the March quarter. Wet Seal has a market cap of approximately $440 million. The stock has been flat since April. Jim Simons’ Renaissance Technologies and Lee Ainslie’s Maverick Capital have large stakes in Wet Seal.

Since April, Coliseum Capital has lost 14.9%, almost tracking the 14.9% loss for the S&P 500 index (NYSEARCA:SPY) during the same period (click here to see the entire portfolio of Coliseum Capital). We generally like their stock picks and believe that investors can outperform index funds by imitating their top stock picks.


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Coliseum Capital's Top Stock Picks