Multi-Billion Dollar Sandler Capital's Top Stock Picks

by: Insider Monkey

By Hioara Dumitru

Sandler Capital Management was founded by Harvey Sandler in 1980 and has been a Registered Investment Advisor since 1988. Andrew Sandler, Harvey's son, has been head of the firm's hedge fund business since 1997. The fund currently manages $1.9 billion in equities alone. Sandler's clients include high net worth individuals, large family offices, funds of hedge funds, pension funds, insurance companies, and sovereign wealth funds.

The fund recently filed its 13F with the SEC, describing some of its main investments during 2013's first quarter. A quick look at the top five equity positions of this new hedge fund might be a good starting point for your own research.

The Q1 13F can be found here. Retail investors can benefit from watching hedge fund sentiment (discover the details of this strategy), as you've become so aware of lately.

Top bet

Generac Holdings Inc. (NYSE:GNRC) is Sandler's top bet; the fund holds 2,046,100 shares of the manufacturer and distributor of engine powered products value at $72.309 million as of March 31. The fund has been bullish on this stock during the quarter, buying an additional 802,500 shares and lifting the value of its holdings by 69.47%. The company has trailing total returns on its stock of 78.66% on a year-to-year basis. This compares to an industry average of 27.99%. Generac's trailing EPS is $1.35 while its P/E ratio is 26.79, fifth lowest in the industry. The stock holds a mean recommendation of 2.1 from analysts.

Number two

Verisk Analytics (NASDAQ:VRSK) is next on the list with a rise in the fund's stake to 157,700 shares, increasing the value of the holding by 40.43% to $69.859 million. The position comprises 2.06% of the total equities under management stated in the 13F. Shares trade at a trailing P/E ratio of 30.97 and sport a diluted trailing EPS of 1.95. Verisk's profit margin is 21.06%, the 10th highest in its industry. Wall Street experts predict a full-year EPS of $2.30, and have a mean recommendation of 2.3 for the stock.

The best of the rest

During the quarter, Sandler Capital Management increased its position in FEI Company (NASDAQ:FEIC), buying an additional 57,399 shares, increasing the size of the holding to 1,133,700 shares, with the total value of the holding rising by 23.03% to $68.475 million. The fund is one of the ten largest institutional investors in FEI. The stock trades at a forward P/E ratio of 18.86 with a trailing EPS of $2.82 and an annual estimated EPS of $3.07. With total returns on the stock of over 52% for the last twelve months, analysts are generally positive on the momentum play.

Synopsys Inc. (NASDAQ:SNPS) has the fourth spot in the equity portfolio of this fund, with Sandler increasing its stake last quarter. The number of shares held by the fund spiked from 747,200 to 1,567,300. Consequently, the value of the holding increased by 115.39% to a level of $56.235 million. Synopsys trades at trailing P/E ratio of 27.50 and a forward estimate of 14.02; the stock's beta is also 0.57, indicating that it remains a relatively safe investment, in comparison to some of the other plays in this 13F.

A newcomer to the fund's top five is independent oil and gas company Whiting Petroleum Corp. (NYSE:WLL). Sandler Capital Management was bullish on the stock, buying 833,300 shares for a total value of $42.365 million at the end of the first quarter. The company has a trailing P/E ratio of 13.53, which is just slightly over the forward rate. With a beta of 2.03, a significant annual profit margin of 18.08%, and a trailing EPS of $3.38, the stock receives a high mean recommendation of 1.80 from analysts.

Final remarks

Sandler Capital Management has positions in major companies across various industries. The fund increased its exposure to equities, expanding the size of its 13F to more than $3.3 billion in total (see how large the 13F was at the end of 2012 for comparison).

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

Business relationship disclosure: This article is written by Insider Monkey's writer, Hioara Dumitru, and edited by Jake Mann. They don't have any business relationships with any of the companies mentioned in this article and they didn't receive compensation (other than from Insider Monkey and Seeking Alpha) to write this article.

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