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Charles Davidson’s and Joseph Jacobs’ Wexford Capital’s Return, AUM, and Holdings

Nina Zdinjak

Back in 1994, Charles E. Davidson and Joseph Jacobs, experienced investors with proficiency in distressed situation investments, co-founded their own investment management firm, called Wexford Capital. The fund is based in Greenwich, Connecticut, while providing an additional office in West Palm Beach, Florida. At the end of December 2016, it held $2.8 billion in assets under management. Prior to launching Wexford Capital, Charles Davidson, who is the fund’s current Chief Investment Officer and Chairman, was employed at Steinhardt Partners L.P. where he was in charge of all fixed income arbitrage, private equity, distressed/bankruptcy and special situation investments of the several billion dollars worth hedge fund. Prior to his employment at Steinhardt Partners, Charles Davidson worked at Goldman Sachs  Co, where he was running proprietary trading and corporate bond trading sectors. Presently, he serves as the portfolio manager for the Wexford Catalyst Funds, Wexford Spectrum Funds, and the Wexford Credit Opportunities. He earned his B.A. and then M.B.A. in Economics from the University of California (Los Angeles).

Wexford Capital’s second co-founder, Joseph M. Jacobs is actually the president of the fund. Prior to co-founding Wexford Capital, Joseph Jacobs worked at Bear Stearns & Co., Inc as a Senior Managing Director, mainly focusing on restructurings and bankruptcies. He was in charge of all the company’s real estate investments. Before joining Bear Stearns & Co., Inc Joseph Jacobs was a commercial lending officer at Citibank, N.A. He graduated from the Wharton School of the University of Pennsylvania with a B.S. in Economic, and from Harvard Business Scholl with an M.B.A. Presently, aside from being Wexford Capital’s president, he is in charge of supervising Wexford Private Equity Funds’ investment moves.

Charles Davidson - Wexford Capital

Even though Wexford Capital is known as a hedge fund with a particular specialty related to distressed situation investments, due to the vast experience of its co-founders in this sphere, the fund also provides professional investment services across a variety of industries, such as real estate, transportation, energy/natural resources, and technology/telecommunications. Wexford Capital runs three hedge funds that have more than $2 billion in assets under management, those being – the multi-strategy credit-oriented Wexford Credit Opportunities Fund, Wexford Catalyst Fund, which is oriented towards energy, industrials, and natural resources, and the opportunistic/global macro Wexford Spectrum Fund. The fund also runs a few private equity funds, and has made north of $6.5 billion in private equity investments. As for the fund’s return figures, we managed to find these:

Its Wexford Spectrum delivered an annualized return of 14.42% (with the volatility of 10.50%) since its launching in 1997 through May 2011. For the three months ended June 30, 2008, its Wexford Offshore Credit Opts. Ltd. fund delivered 1.28%, Wexford Credit Opp. LP brought back 1.27%, Wexford Offshore Catalyst Fund Ltd. and Wexford Catalyst LP gained 7.89% individually, and Wexford Spectrum Fund LP Class A delivered 6.91%. It is also interesting that Wexford Capital’s non-microcap stock picks have returned 21% over the 12 month period, which ended June 2017.

Its Wexford Catalyst Fund, L.P. returned 10.68% in 2013, 20.58% in 2014, followed by a loss in 2015 of 13.59%. It came back in 2016 very strong delivering 33.98%, and then 6.82% in 2018. Last year through October in gained 7.12%. Wexford Catalyst Fund, L.P. had a total return of 269.97%, for a compound annual return of 9.92%. Its worst drawdown stood at 23.89. Moving on to Wexford Spectrum Fund, L.P., which gained 14.96% in 2013, followed by 10.41% in 2014, and a loss of 8.14% in 2015. In 2016, it gained 12.98%, and in 2017, 7.84%. In 2018 (through October), Wexford Spectrum Fund, L.P. kept its positive performance, delivering a return of 5.71%. Its total return amounted to 910.13%, for a compound annual return of 11.36%, while its worst drawdown was of 19.09.

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Continuing with Wexford Capital’s equity portfolio, which was valued at $1.17 billion at the end of December 2018, representing a decrease of 25% from one quarter earlier when it carried a value of $1.57 billion. During the quarter the fund dumped more than 90 stocks, while also establishing new positions in 35 companies, hence at the end of the quarter, its portfolio counted around 76 long positions. Wexford Capital held the second largest stake in Marathon Petroleum Corp (NYSE:MPC) which is a company that offers a variety of petroleum services, such as refining, transportation, and marketing. Its headquarters is in Findlay, Ohio. Marathon Petroleum has a market cap of $39.75 billion, and it is one of the 30 Most Popular Stocks Among Hedge Funds. After the fund had raised its stake in the company by 96% it was worth $174.75 million, on the account of 2.96 shares, amassing 14.9% of the fund’s portfolio.

On the next page, you can read more about similar positions and most important investment moves the fund made during the fourth quarter of 2018.

The most valuable position Wexford Capital held at the end of December 2018, was in Mammoth Energy Services Inc (NASDAQ:TUSK),  an integrated oilfield service company, that provides a plethora of services related to the energy industry, such as directional drilling, pressure pumping, and infrastructure, to name a few. The fund’s position in the company included 21.99 million shares outstanding, which were worth $395.35 million, accounting for 33.72% of its entire portfolio. Mammoth Energy has a market cap of $943.01 million, and it is trading at a price-to-earnings ratio of 9.75. Over the last 12 months, the company’s stock lost 36.95%, and on March 8th it had a closing price of $20.75. In its last financial report for the Q3 of 2018,  the company disclosed record net income of $69.5 million, or $1.54 per diluted share, compared to net loss of $801 million, and a loss per diluted share of $0.02 in the corresponding quarter of 2017. Its total revenue for the Q3 2018, amounted to $384.0 million, down by 28% from one quarter earlier, and up by 157% from the same quarter in 2017. At the beginning of January, Imperial Capital restated its Outperform rating on the stock with a price target of $40, while Tudor Pickering upgraded its rating on it to ‘Buy’ from ‘Hold’

Wexford Capital initiated the largest new position during the fourth quarter of 2018 in Colfax Corp (NYSE:CFX), which is a Fortune 500 company known for its innovations in science and technology. It was formed as a spinoff of an American conglomerate, Danaher Corporation. The fund purchased 1.24 million Colfax’ shares, which carried a value of $25.89 million, amassing 2.2% of its equity portfolio. For the three months ended December 31, 2018, Colfax disclosed net income from continuing operations of $43 million or $0.36 per diluted share, versus a loss of $1.53 per share in the same quarter of 2017. Its adjusted net income amounted to $81 million or $0.69 per share, compared to EPS of $0.45 for the same period in 2017. The company also reported its full-year 2018 net income which was of $169 million, or $1.40 per diluted share, versus a loss of $0.59 per share in 2017.

Recently, Colfax announced that it has completed the acquisition of a medical device company known for a plethora of products for rehabilitation and physical therapy, DJO Global. Colfax has a market cap of 3.25 billion, and it is trading at a price-to-earnings ratio of 23.78. Year-to-date, the company’s stock gained 25%, and on March 8th it had a closing price of $26.17. On February 22nd, Raymond James repeated its ‘Buy’ rating on the stock with a price target of $25.00, and about a week earlier Gabelli restated its ‘Buy’ rating as well.

Among the biggest positions the fund obtained during Q4 2018 were also those in Trinity Industries Inc (NYSE:TRN), whose 942,406 shares with a value of $19.4 million the fund purchased, and AerCap Holdings N.V. (NYSE:AER) in which the fund established $17.74 million worth a position, on the account of 447,921 shares.

Out of 90 stocks the fund said goodbye to during the fourth quarter of 2018, the biggest positions held in Barrick Gold Corp (NYSE:GOLD), Energy Transfer LP Unit (NYSE:ET), and Evergy Inc (NYSE:EVRG). Wexford Capital sold out 2.52 million Barrick Gold’s shares with a value of $27.89 million, 817,668 Energy Transfer’s shares, which carried a value of $18.2 million, and 330,777 shares of Evergy, which were valued at $18.17 million.

Disclosure: None

This article was originally published at Insider Monkey.