Combing Fund Holdings (Frost Gamma Investment Trust ) For Ideas

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Includes: LTS, MSLP, PGLC, ROX, TEVA
by: Devon Shire

Summary

The best place I know of to find good stock ideas is in the portfolio of professional, proven, successful investors.

Frost Gamma Investment Trust is the portfolio of billionaire investor Philip Frost and is full of off the radar small-cap ideas.

While the US markets have to be overdue for a significant correction, the Frost portfolio is a good place to search for ideas.

Over the years, I've learned that there may be a possibility that I am not as smart as my mother told me I was. When it comes to investing though, you don't have to be a rocket scientist. You just have to stick to your areas of competency.

As Clint Eastwood once said in the character of Dirty Harry Callahan… "A man's got to know his limitations".

Along those lines, some of the best investments I've made have been the result of me copying the moves of more successful investors.

Among the investors I regularly track are Bruce Berkowitz and the Fairholme Fund, Longleaf Partners, Jim Grant and of course Warren Buffett.

Another portfolio that I visit for ideas is that of Frost Gamma Investments Trust. That is the portfolio of Dr. Philip Frost.

Frost is a billionaire. He has made these billions by taking small companies and making them big. Frost started out by building Key Pharmaceuticals which he sold in 1986 and pocketed $100 million. Then he founded IVAX and as CEO built that company to the point where it was sold for $7.4 billion in 2006 to Teva Pharmaceuticals (NYSE:TEVA).

I was reminded of Frost when he was profiled recently in Barron's. For a retail investor like me, looking to Frost's portfolio for ideas is great because he is focused on small-caps where larger returns are possible.

I'm not sure I can understand some of the reasoning behind his investments enough to own them, but given that he is a billionaire and I am not, I think it is worth trying.

I've provided details on a few of his holdings below. I mean for it to be a shortlist from which to do more due diligence and certainly not a recommendation for any of these.

1) Pershing Gold (NASDAQ:PGLC) - Frost Gamma Owns 53 million of Pershing's 352 million outstanding shares.

Pershing Gold Corporation (Pershing Gold) is an emerging Nevada gold producer that is looking to fast-track the reopening of the Relief Canyon Mine. There is no exploration risk here, this is a known deposit with infrastructure in place. This property was purchased out of bankruptcy after the previous owners ran into financial trouble.

source of image: yahoo finance

Like most junior resource stocks, the share price of Pershing is not up for the year. Unlike most of its peers though, the shares of Pershing haven't fallen off a cliff in 2014. I think the market is aware that Pershing has some deep pockets backing it with Frost and a quality management team and asset.

Despite the weak share price, Pershing has had some significant achievements with gold resource increasing five-fold over the past two years.

source of image: Pershing Gold investor presentation

I like that this company is based in the United States and has an experienced and credible management team with Stephen Alfers at the lead. I don't like the fact that the company is not yet generating cash flow and I have my reservations about where the price of gold could go in a deflationary world.

2) Castle Brands (NYSEMKT:ROX) - Frost owns 34% of Castle's outstanding shares

source of image: yahoo finance

Castle Brands develops and markets premium and super premium brands in the following beverage alcohol categories:

- rum

- whiskey

- liqueurs

- vodka

- tequila.

Castle Brands distributes its products in all 50 U.S. states and the District of Columbia, in 13 primary international markets, including Ireland, Great Britain, Northern Ireland, Germany, Canada, South Africa, Bulgaria, France, Russia, Finland, Norway, Sweden, China, and the Duty Free markets, and in a number of other countries in continental Europe and Latin America.

Castle markets the following brands, among others, Gosling's Rum, Gosling's Stormy Ginger Beer, Gosling's Dark 'n Stormy ready-to-drink cocktail, Jefferson's , Jefferson's Reserve and Jefferson's Presidential Select Bourbons, Jefferson's Rye Whiskey, Pallini Liqueurs, Clontarf Irish Whiskey, Knappogue Castle Whiskey, Brady's Irish Cream, Boru Vodka, Tierras Tequila, Celtic Honey Liqueur, Castello Mio Sambucas and Gozio Amaretto.

source of image: Castle Brand's most recent investor presentation

Castle has been investing heavily to build and grow its brands over the past five years. Those initiatives have driven strong revenue growth at the expense of short-term profitability. I believe that this is a long-term strategy that is in the best interests of the company, which shouldn't be a surprise given that management and the Board (including Frost) own 48% of the outstanding shares.

Again though, this is a company with big plans and not big current cash flows. I really appreciate the big insider ownership, but until there is steady and predictable cash flow, this would be considered somewhat speculative.

3) MusclePharm (OTCQB:MSLP) - Frost owns convertible preferred shares

MusclePharm Corporation is a scientifically driven, performance lifestyle company that develops, manufactures, markets and distributes branded nutritional supplements. It offers a complete range of powders, capsules, tablets and gels. Its portfolio of recognized brands, including MusclePharm Hybrid and Core Series, Arnold Schwarzenegger Series, and FitMiss, are marketed and sold in more than 110 countries and available in over 35,000 retail outlets globally. These clinically proven, scientific nutritional supplements are developed through a six-stage research process that utilizes the expertise of leading nutritional scientists, doctors and universities.

source of image: yahoo finance

MusclePharm is chasing a big market. According to the "Nutrition Business Journal," the market for Sports Nutrition & Weight Loss in the United States was estimated to be approximately $31 billion in 2013 (the most recent year for which data is available).

Like Castle Brands, MusclePharm has been spending aggressively on growth. Sales in the last full fiscal year (2013) were $110 million vs $67 million the year before (2012), and gross profit was $33 million vs $14 million the night before.

In the current fiscal year (2014), revenue is expected to fall into a range of $185 million to $195 million (see image below from the most recent MSLP corporate presentation) so the growth is actually accelerating.

source of image: MSLP's most recent investor presentation

More important than the revenue growth is that gross margins are also expanding. The current year will see all of these long-term growth investments start to hit the bottom line.

source of image: MSLPs most recent investor presentation

I like the growth here and I am very aware of the strength of the brand given I'm a gym rat myself. Again though, this is an early stage company and I'd reckon that could be a bit of a fad product.

MSLP is likely not for a concentrated portfolio, but certainly a high growth and diversified one.

4) Ladenburg Thalmann Financial (NYSEMKT:LTS) - Frost owns 35% of the shares

Source of chart: yahoo finance

The Frost portfolio is spread across a very different group of businesses. Ladenburg Thalmann Financial is engaged in investment banking, equity research, institutional sales and trading, independent brokerage and advisory services and asset management services through its principal subsidiaries, Ladenburg Thalmann & Co Inc., Investacorp Inc. and Triad Advisors Inc.

The company was founded way back in 1876 and a New York Stock Exchange member since 1879.

I've chosen to highlight Ladenburg because the insider buying has been absolutely relentless for two consecutive years. I don't know that I've ever seen buying from insiders as consistently over this long a period as this before.

Insider Transactions Reported - Last Two Years

Date

Insider

Shares

Type

Transaction

Value*

Dec 8, 2014

FROST PHILLIP MD ET AL Director

15,000

Indirect

Purchase at $3.49 per share.

52,350

Dec 1, 2014

KAUFMAN BRETT Officer

2,000

Direct

Purchase at $3.30 per share.

6,600

Nov 24, 2014

LAMPEN RICHARD Officer

20,000

Direct

Option Exercise at $0.48 per share.

9,600

Nov 24, 2014

GILINSKI SAUL Director

5,000

Direct

Purchase at $3.45 per share.

17,250

Nov 21, 2014

LAMPEN RICHARD Officer

13,333

Indirect

Option Exercise at $1.68 per share.

22,399

Sep 30, 2014

GIOVANNIELLO JOSEPH Officer

1,117

Direct

Purchase at $4.03 per share.

4,501

Sep 11, 2014

FROST PHILLIP MD ET AL Director

10,000

Indirect

Purchase at $22.91 per share.

229,100

Sep 9, 2014

FROST PHILLIP MD ET AL Director

40,000

Indirect

Purchase at $23.03 - $23.05 per share.

922,0002

Sep 8, 2014

FROST PHILLIP MD ET AL Director

60,000

Indirect

Purchase at $23.05 per share.

1,383,000

Aug 21, 2014

SIMKIN JACQUELINE M Director

5,000

Indirect

Purchase at $3.57 per share.

17,850

Jul 15, 2014

FROST PHILLIP MD ET AL Director

50,000

Indirect

Purchase at $3.64 per share.

182,000

Jul 15, 2014

GILINSKI SAUL Director

10,000

Direct

Purchase at $3.55 per share.

35,500

Jul 9, 2014

GILINSKI SAUL Director

30,000

Direct

Purchase at $3.69 - $3.88 per share.

114,0002

Jul 8, 2014

GILINSKI SAUL Director

10,000

Direct

Purchase at $3.77 per share.

37,700

Jul 7, 2014

GILINSKI SAUL Director

40,000

Direct

Purchase at $3.51 - $3.56 per share.

141,0002

Jul 7, 2014

FROST PHILLIP MD ET AL Director

100,000

Indirect

Purchase at $3.50 per share.

350,000

Jul 3, 2014

GILINSKI SAUL Director

10,000

Direct

Purchase at $3.48 - $3.49 per share.

35,0002

Jul 2, 2014

FROST PHILLIP MD ET AL Director

100,000

Indirect

Purchase at $3.46 per share.

346,000

Jul 2, 2014

GILINSKI SAUL Director

80,085

Direct

Purchase at $3.35 - $3.49 per share.

274,0002

Jul 1, 2014

FROST PHILLIP MD ET AL Director

100,000

Indirect

Purchase at $3.26 per share.

326,000

Jun 30, 2014

GILINSKI SAUL Director

60,000

Direct

Purchase at $3.12 - $3.15 per share.

188,0002

Jun 30, 2014

GIOVANNIELLO JOSEPH Officer

835

Direct

Purchase at $2.99 per share.

2,496

Jun 25, 2014

SIMKIN JACQUELINE M Director

15,303

Indirect

Purchase at $2.96 per share.

45,296

Jun 17, 2014

GILINSKI SAUL Director

4,544

Direct

Purchase at $2.81 - $2.84 per share.

13,0002

Jun 12, 2014

MALAMED ADAM SCOTT Officer

5,000

Direct

Purchase at $2.78 - $2.79 per share.

14,0002

Jun 9, 2014

GILINSKI SAUL Director

10,000

Direct

Purchase at $3.11 per share.

31,099

Jun 5, 2014

GILINSKI SAUL Director

1,845

Direct

Purchase at $2.98 per share.

5,498

Jun 3, 2014

GILINSKI SAUL Director

5,000

Direct

Purchase at $2.93 per share.

14,650

May 21, 2014

ZEITCHICK MARK Officer

5,000

Indirect

Purchase at $2.73 per share.

13,650

May 21, 2014

LAMPEN RICHARD Officer

5,000

Direct

Purchase at $2.67 - $2.72 per share.

13,0002

May 21, 2014

ROSENSTOCK RICHARD J Director

5,000

Indirect

Purchase at $2.66 - $2.72 per share.

13,0002

May 20, 2014

MALAMED ADAM SCOTT Officer

5,000

Direct

Purchase at $2.67 per share.

13,350

May 20, 2014

FROST PHILLIP MD ET AL Director

15,000

Indirect

Purchase at $2.65 per share.

39,750

May 14, 2014

KAUFMAN BRETT Officer

3,000

Direct

Purchase at $2.80 per share.

8,400

May 12, 2014

ZEITCHICK MARK Officer

125,000

Indirect

Option Exercise at $1.01 per share.

126,250

May 12, 2014

ZEITCHICK MARK Officer

43,535

Indirect

Disposition (Non Open Market)

N/A

May 9, 2014

MALAMED ADAM SCOTT Officer

5,000

Direct

Purchase at $2.67 - $2.72 per share.

13,0002

May 9, 2014

ROSENSTOCK RICHARD J Director

5,000

Indirect

Purchase at $2.67 - $2.72 per share.

13,0002

May 9, 2014

ZEITCHICK MARK Officer

5,000

Indirect

Purchase at $2.70 per share.

13,500

May 9, 2014

LAMPEN RICHARD Officer

5,000

Direct

Purchase at $2.67 - $2.72 per share.

13,0002

Apr 15, 2014

LAMPEN RICHARD Officer

5,000

Direct

Purchase at $2.59 per share.

12,950

Apr 11, 2014

MALAMED ADAM SCOTT Officer

5,000

Direct

Purchase at $2.67 - $2.69 per share.

13,0002

Apr 11, 2014

LAMPEN RICHARD Officer

5,000

Direct

Purchase at $2.67 - $2.68 per share.

13,0002

Apr 11, 2014

ZEITCHICK MARK Officer

5,000

Indirect

Purchase at $2.65 per share.

13,250

Apr 11, 2014

ROSENSTOCK RICHARD J Director

5,000

Indirect

Purchase at $2.67 - $2.69 per share.

13,0002

Mar 31, 2014

GIOVANNIELLO JOSEPH Officer

4,009

Direct

Purchase at $2.87 per share.

11,505

Mar 14, 2014

ZEITCHICK MARK Officer

5,000

Indirect

Purchase at $2.98 - $3 per share.

15,0002

Mar 14, 2014

GILINSKI SAUL Director

10,000

Direct

Purchase at $3 per share.

30,000

Mar 14, 2014

MALAMED ADAM SCOTT Officer

5,000

Indirect

Purchase at $2.97 - $3 per share.

15,0002

Mar 14, 2014

FROST PHILLIP MD ET AL Director

100,000

Indirect

Purchase at $2.98 per share.

298,000

Mar 14, 2014

LAMPEN RICHARD Officer

5,000

Direct

Purchase at $2.97 - $3 per share.

15,0002

Mar 14, 2014

SIMKIN JACQUELINE M Director

20,000

Indirect

Purchase at $2.94 per share.

58,800

Mar 14, 2014

ROSENSTOCK RICHARD J Director

5,000

Indirect

Purchase at $2.97 - $3 per share.

15,0002

Mar 14, 2014

KRASNO RICHARD M Director

5,000

Indirect

Purchase at $2.97 - $3 per share.

15,0002

Jan 31, 2014

GIOVANNIELLO JOSEPH Officer

30,000

Direct

Option Exercise at $1.01 per share.

30,300

Jan 13, 2014

ZEITCHICK MARK Officer

5,000

Indirect

Purchase at $2.94 - $2.95 per share.

15,0002

Jan 13, 2014

LAMPEN RICHARD Officer

5,000

Direct

Purchase at $2.93 - $2.97 per share.

15,0002

Jan 13, 2014

ROSENSTOCK RICHARD J Director

5,000

Indirect

Purchase at $2.93 - $2.97 per share.

15,0002

Jan 13, 2014

MALAMED ADAM SCOTT Officer

5,000

Direct

Purchase at $2.93 - $2.97 per share.

15,0002

Dec 31, 2013

GIOVANNIELLO JOSEPH Officer

840

Direct

Purchase at $2.97 per share.

2,494

Dec 20, 2013

LORBER HOWARD M Director

200,000

Direct

Disposition (Non Open Market)

N/A

Dec 10, 2013

GILINSKI SAUL Director

10,000

Direct

Purchase at $3.39 per share.

33,900

Dec 9, 2013

GILINSKI SAUL Director

15,000

Direct

Purchase at $3.33 - $3.4 per share.

50,0002

Dec 6, 2013

GILINSKI SAUL Director

20,000

Direct

Purchase at $3.17 - $3.21 per share.

64,0002

Nov 7, 2013

GILINSKI SAUL Director

25,000

Direct

Purchase at $2.24 - $2.25 per share.

56,0002

Oct 2, 2013

MALAMED ADAM SCOTT Officer

20,000

Direct

Purchase at $1.75 - $1.76 per share.

35,0002

Sep 30, 2013

GIOVANNIELLO JOSEPH Officer

2,617

Direct

Purchase at $1.72 per share.

4,501

Sep 17, 2013

MALAMED ADAM SCOTT Officer

20,000

Direct

Purchase at $1.69 - $1.71 per share.

34,0002

Aug 15, 2013

ROSENSTOCK RICHARD J Director

20,000

Indirect

Purchase at $1.67 per share.

33,400

Aug 15, 2013

SIMKIN JACQUELINE M Director

87,000

Indirect

Purchase at $1.67 per share.

145,290

Aug 15, 2013

FROST PHILLIP MD ET AL Director

500,000

Indirect

Purchase at $1.67 per share.

835,000

Aug 15, 2013

LAMPEN RICHARD Officer

50,000

Indirect

Purchase at $1.67 per share.

83,500

Aug 15, 2013

ZEITCHICK MARK Officer

20,000

Indirect

Purchase at $1.67 per share.

33,400

Aug 15, 2013

MALAMED ADAM SCOTT Officer

20,000

Direct

Purchase at $1.67 per share.

33,400

Jun 28, 2013

GILINSKI SAUL Director

20,000

Direct

Purchase at $25.03 per share.

500,600

Jun 28, 2013

GIOVANNIELLO JOSEPH Officer

1,595

Direct

Purchase at $1.57 per share.

2,504

May 24, 2013

KAUFMAN BRETT Officer

200

Direct

Purchase at $25 per share.

5,000

May 24, 2013

LAMPEN RICHARD Officer

4,000

Indirect

Purchase at $25 per share.

100,000

May 24, 2013

MALAMED ADAM SCOTT Officer

4,000

Direct

Purchase at $25 per share.

100,000

May 24, 2013

GILINSKI SAUL Director

20,000

Direct

Purchase at $25 per share.

500,000

May 24, 2013

ZEITCHICK MARK Officer

4,000

Indirect

Purchase at $25 per share.

100,000

May 24, 2013

GIOVANNIELLO JOSEPH Officer

2,000

Direct

Purchase at $25 per share.

50,000

May 24, 2013

FROST PHILLIP MD ET AL Director

800,000

Indirect

Purchase at $25 per share.

20,000,000

May 24, 2013

PODELL JEFFREY Director

2,000

Direct

Purchase at $25 per share.

50,000

May 24, 2013

SIMKIN JACQUELINE M Director

8,000

Indirect

Purchase at $25 per share.

200,000

May 24, 2013

GENSON BRIAN S Director

2,000

Indirect

Purchase at $25 per share.

50,000

May 24, 2013

ROSENSTOCK RICHARD J Director

2,000

Indirect

Purchase at $25 per share.

50,000

Apr 15, 2013

SIMKIN JACQUELINE M Director

7,500

Indirect

Purchase at $1.47 - $1.52 per share.

11,0002

Apr 15, 2013

FROST PHILLIP MD ET AL Director

10,000

Indirect

Purchase at $1.44 - $1.46 per share.

15,0002

Apr 15, 2013

ROSENSTOCK RICHARD J Director

5,000

Indirect

Purchase at $1.44 per share.

7,200

Apr 9, 2013

MALAMED ADAM SCOTT Officer

5,000

Direct

Purchase at $1.60 - $1.62 per share.

8,0502

Apr 8, 2013

MALAMED ADAM SCOTT Officer

5,000

Direct

Purchase at $1.60 per share.

8,000

Apr 8, 2013

SIMKIN JACQUELINE M Director

5,000

Indirect

Purchase at $1.59 - $1.61 per share.

7,9992

Apr 5, 2013

FROST PHILLIP MD ET AL Director

10,000

Indirect

Purchase at $1.61 - $1.63 per share.

16,0002

Apr 5, 2013

MALAMED ADAM SCOTT Officer

5,000

Direct

Purchase at $1.60 - $1.63 per share.

8,0752

Apr 5, 2013

LAMPEN RICHARD Officer

5,000

Direct

Purchase at $1.57 - $1.63 per share.

7,9992

Apr 5, 2013

ZEITCHICK MARK Officer

5,000

Indirect

Purchase at $1.62 per share.

8,100

Apr 4, 2013

SIMKIN JACQUELINE M Director

5,000

Indirect

Purchase at $1.60 per share.

8,000

Apr 4, 2013

FROST PHILLIP MD ET AL Director

5,000

Indirect

Purchase at $1.60 per share.

8,000

Apr 4, 2013

ROSENSTOCK RICHARD J Director

5,000

Indirect

Purchase at $1.60 per share.

8,000

Apr 4, 2013

MALAMED ADAM SCOTT Officer

5,000

Direct

Purchase at $1.60 per share.

8,000

Apr 4, 2013

GILINSKI SAUL Director

5,000

Direct

Purchase at $1.63 - $1.64 per share.

8,1752

Apr 3, 2013

MALAMED ADAM SCOTT Officer

5,000

Direct

Purchase at $1.62 - $1.65 per share.

8,1752

Apr 2, 2013

MALAMED ADAM SCOTT Officer

5,000

Direct

Purchase at $1.67 - $1.69 per share.

8,4002

Apr 1, 2013

MALAMED ADAM SCOTT Officer

5,000

Direct

Purchase at $1.68 per share.

8,400

Mar 28, 2013

GIOVANNIELLO JOSEPH Officer

1,506

Direct

Acquisition (Non Open Market) at $1.58 per share.

2,379

Mar 27, 2013

GILINSKI SAUL Director

10,000

Direct

Purchase at $1.63 per share.

16,300

Mar 26, 2013

FROST PHILLIP MD ET AL Director

10,000

Indirect

Purchase at $1.60 per share.

16,000

Mar 21, 2013

ROSENSTOCK RICHARD J Director

6,766

Indirect

Purchase at $1.68 - $1.7 per share.

11,0002

Mar 21, 2013

FROST PHILLIP MD ET AL Director

10,000

Indirect

Purchase at $1.68 - $1.69 per share.

17,0002

Mar 21, 2013

LAMPEN RICHARD Officer

6,773

Direct

Purchase at $1.68 - $1.7 per share.

11,0002

Mar 21, 2013

MALAMED ADAM SCOTT Officer

6,778

Direct

Purchase at $1.68 - $1.7 per share.

11,0002

Mar 21, 2013

ZEITCHICK MARK Officer

10,000

Indirect

Purchase at $1.69 per share.

16,900

Mar 20, 2013

LAMPEN RICHARD Officer

3,227

Direct

Purchase at $1.65 - $1.68 per share.

5,3722

Mar 20, 2013

MALAMED ADAM SCOTT Officer

3,222

Direct

Purchase at $1.65 - $1.68 per share.

5,3642

Mar 20, 2013

SIMKIN JACQUELINE M Director

10,000

Indirect

Purchase at $1.64 - $1.65 per share.

16,0002

Mar 20, 2013

ROSENSTOCK RICHARD J Director

3,234

Indirect

Purchase at $1.65 - $1.68 per share.

5,3842

Mar 19, 2013

FROST PHILLIP MD ET AL Director

5,000

Indirect

Purchase at $1.61 - $1.62 per share.

8,0752

Jan 30, 2013

GIOVANNIELLO JOSEPH Officer

60,351

Direct

Statement of Ownership

N/A

Dec 31, 2012

FROST PHILLIP MD ET AL Director

75,000

Indirect

Purchase at $1.35 - $1.37 per share.

102,0002

Dec 28, 2012

FROST PHILLIP MD ET AL Director

10,000

Indirect

Purchase at $1.34 - $1.38 per share.

14,0002

Dec 11, 2012

BEINSTEIN HENRY C Director

60,000

Direct

Option Exercise at $0.30 - $0.73 per share.

N/A

Source of insider buying detail - Yahoo Finance

I apologize for the long chart, I thought the length of it was worth seeing since it details a lot of insider conviction about this company. Insider buying isn't enough reason alone to own a stock, but this kind of insider buying is certainly interesting enough to investigate further.

Four Ideas - Implications For Investors

So there are four ideas from the portfolio of a man who has had a lot of success fishing in the small-cap pond. Personally, I think the U.S. markets have to be getting stretched given we are in year six of a bull market. These companies may be worth doing due diligence on and then waiting until a market correction occurs and a better price is available.

Note: Some of these are all small-cap companies, and some of them are investing a lot of money in the hopes of rapid growth turning into significant products. This article is not a detailed analysis of any of them, but rather intended to suggest investment ideas from the portfolio of a successful professional investor for deeper analysis. I would also note that Frost's own portfolio is very diversified which is appropriate for his aggressive style of investing.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.