Wayne, PA-based investment adviser Schneider Capital Management, headed by Chief Investment Officer Arnold Schneider, manages over $1.8 billion in two equity mutual funds, Schneider Value Fund and Schneider Small Cap Value Fund, and in separately managed accounts.
The firm was founded by Arnold Schneider in 1996, and it employs a disciplined, deep-value investing approach to picking its investments. Based on the latest SEC 13-F Q4, filed on Monday, February 13, the fund holds $1.14 billion in 13-F assets in a moderately diversified portfolio of over 120 positions. The firm has invested a quarter of its holdings in large-caps, 40% in mid-caps, and the remaining in small-cap equities. The portfolio is over-weight in the financial and basic materials sectors, and it is under-weight the technology, healthcare and energy sectors.
The following are stocks that Schneider is bullish on, based on its Q4 filing, and that are also trading under-valued compared to the peers in their group (see table):
SunTrust Banks Inc. (NYSE:STI): STI is a holding company for SunTrust Bank, which provides traditional deposit and credit services, as well as trust and investment services via 1,668 offices in Alabama, Arkansas, Florida, Georgia, Maryland, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, West Virginia and Washington, D.C.
Schneider added $10 million in Q4 to its $53 million prior quarter position. STI trades at 8-9 forward P/E and 0.6 P/B compared to averages of 9.2 and 0.9 for its peers in the major regional banks group. Other major funds that added to their STI position in Q4 include mega funds JPMorgan Chase & Co. ($3.9 million shares), Morgan Stanley (1.4 million shares), and Fidelity Investments (1.3 million shares).
First Horizon National Corp. (NYSE:FHN): FHN is a holding company for First Tennessee Bank that operates via 184 financial centers in TN, GA and MS. Schneider added $8 million in Q4 to its $19 million prior quarter position. FHN trades at 10-11 forward P/E and 1.0 P/B compared to averages of 13.2 and 0.6 for its peers in the southeast banks group.
Other major funds that added to their FHN position in Q4 include mega funds State Street Corp. (4.7 million shares) and BNY Mellon Corp. (2.6 million shares), as also guru fund RS Investment Management (1.1 million shares).
Popular Inc. (NASDAQ:BPOP): BPOP is a holding company for Popular de Puerto Rico, that operates 194 branches in Puerto Rico, the Caribbean and the U.S. Schneider added a new $3 million position in Q4. BPOP profits have plunged in recent years, and the stock in response is down, trading near historic lows and down over 90% from its highs in 2004-2005; its shares trade at a current 12 P/E on a TTM basis, and at 0.5 P/B, compared to averages of 14.5 and 0.7 for its peers in the southeast regional banking group.
Regions Financial Corp. (NYSE:RF): RF is a holding company for Regions Bank that provides a range of commercial, retail and mortgage banking services in the U.S. via 1,772 offices in 16 states in the South and the Midwest. Schneider actually cut a minor $5 million in Q4 from their $67 million prior quarter position, but at $62 million, it is the largest position in its portfolio.
Also, the 7% reduction in Schneider's position in RF is still less than the 8% reduction in its 13-F assets from Q3 to Q4, so proportionally it still accounts for a larger proportion of its portfolio in Q4 than it did in Q3. Besides Schneider, other major funds that are bullish on RF, by virtue of adding to their positions in Q4, include mega fund State Street Corp. (3.2 million shares) and BNY Mellon (1.2 million shares).
RF reported a strong Q4 last month, beating earnings estimates (9c v/s 7c); the stock has been in a strong and steady uptrend this year, rising about 40% YTD. A number of brokers including RBC Capital Markets and Credit Suisse have upgraded the stock recently, raising their price targets. Its shares currently trade at 8-9 forward P/E and 0.6 P/B compared to averages of 13.2 and 0.6 for its peers in the southeast banks group.
Select stocks that Schneider is most bearish on, based on its moves in Q4 (see table), include:
- Consol Energy Inc. (NYSE:CNX), a producer of bituminous coal and coal-bed methane gas, primarily in the northern and central Appalachian and Illinois basins, in which it cut $18 million from its $57 million prior quarter position;
- Cisco Systems Inc. (NASDAQ:CSCO), the worldwide leader in the manufacturing of IP-based networking and other products related to the communications and IT industry, in which it cut $14 million from its $55 million prior quarter position;
- Huntington Bancshares Inc. (NASDAQ:HBAN), a holding company for the Huntington National Bank that provides commercial and consumer banking services via 611 offices in OH, MI, PA, IN, WV, KY and FL, in which it cut $10 million from its $36 million prior quarter position;
- Arch Coal Inc. (NYSE:ACI), engaged in the production of steam and metallurgical coal from surface and underground mines, in which it cut $7 million from its $62 million prior quarter position;
- KB Home (NYSE:KBH), a builder of single-family attached and detached homes, townhomes and condominiums in nine states across the U.S., in which it cut $6 million from its $55 million prior quarter position;
- Peabody Energy Corp. (NYSE:BTU), engaged in coal production and sale through 28 operations in the U.S. and Australia, in which it cut $8 million from its $55 million prior quarter position;
- PNC Financial Services Group (NYSE:PNC) operates as a diversified financial services company, offering retail banking, corporate and institutional banking, asset management, and residential mortgage banking services, via 2,470 branches in PA, NJ, DE, Washington D.C., and 10 other states, in which it cut $19 million from its $36 million prior quarter position;
- Wells Fargo & Company (NYSE:WFC) is a diversified financial services holding company with 9,000 offices primarily in the U.S., and provides retail, commercial and corporate banking services, in which it cut $14 million from its $44 million prior quarter position.
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