Our “Favorite” Emerging Hedge Fund Manager Got Buyout Offers On Two Of His Top 5 Positions

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Michelle deBoer-Jones
Published on
Updated on
Discover Financial Services

Most value investors know how to spot a deal, although they use many different strategies to generate returns. One hedge fund we have been following many years is a small- and mid-cap value fund focused on North America that seeks to capitalize on stocks where the negative consensus view is likely to be wrong. While we do not provide investment advice, this is a fund we have repeatedly highlighted and privately recommended as a hedge fund worth investing in.

More specifically, the hedge fund seeks “opportunities in areas with negative investor sentiment.” This fund typically steers clear of discussing his current holdings, so in his most recent presentation a copy of which was obtained by Hedge Fund Alpha, he spotlighted his previous theses for Interactive Brokers, AllianceData, United Rentals, Michaels, Archaea Energy and others. The fund is concentrated and tends to hold large positions in its favorite stocks.

For the first quarter, the hedge fund returned 5.1% net. Since its inception 16 years ago, the fund has generated a gross cumulative return of 1,985%, versus the S&P 500 Total Return Index’s 441% return and the Russell 2000 Value Index’s 244% cumulative return.

Going back further, at least two of the hedge fund’s five largest positions in the fourth quarter have been playing out nicely in recent months, potentially generating some nice gains for him. In both stocks, merger-and-acquisition activity is playing a key role in their gains currently. Full disclosure: The CEO of HedgeFundAlpha has a small basket of stocks mimicking this hedge fund, and owns both stocks which got the buyout offer.

M&A for Discover and Tenet Healthcare

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Michelle deBoer-Jones is editor-in-chief of Hedge Fund Alpha. She also writes comparative analyses of stocks for TipRanks and runs Providence Writing Services. Previously, she was a television news producer for eight years, producing the morning news programs for NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spending a short time at the CBS affiliate in Huntsville.