U.S. Markets closed

Matt Sirovich and Jeremy Mindich’s Scopia Capital’s Return, AUM, and Holdings

Nina Zdinjak

Back in 2001 Matt Sirovich and Jeremy Mindich founded institutional alternative asset management called Scopia Capital. The fund is based in New York City, and it has around $11.37 billion in asset under management (December 2016). It provides investment management services with a long/short value driven, market-neutral approach or long only investment management for institutional investors. Before co-founding Scopia Capital, Matt Sirovich was employed by Merril Corporation as a Vice President of Global Marketing, and he also worked at DLJ Merchant Banking II as a Managing Director, at Donaldson, Lufkin & Jenrette as a Vice President, at Concord Camera Corp as a Financial Manager. Whereas the beginnings of his career in investing were at Drexel Burnham Lambert Inc, where he served as an analyst. Matt Sirovich is also a philanthropist, being on the board of the Bowery Residents’ Committee, which offers help to homeless people of New York City. He earned an M.B.A. from Harvard Business School.

The second co-founder of Scopia Capital, Jeremy Mindich, previously worked as a Partner at Porter Felleman, where he helped manage finances and gained professional experience in the analysis of emerging technologies. He was also an Advisor at Sarona Asset Management, and in 2007 he co-founded Propel Capital that invests in entrepreneurs and innovators. Jeremy Mindich is also the Owner and General Manager of Huguenot Street Farm. Before he stepped into the world of investments, he had a very successful career in freelance journalism. He graduated Phi Beta Kappa from Wesleyan University with a B.A. and he also earned an M.P.A. from the Harvard Kennedy School of Government as a Starr Fellow.

Jeremy Mindich - Scopia Capital

Scopia Capital’s investment philosophy relies on four strategies: “long-short equity strategy managed with the discipline of market neutrality, a long-short equity strategy managed with net long exposure, a long-only equity strategy and a long-short health care focused strategy.” It usually runs in-house research about the companies and holds a concentrated portfolio of both long and short positions carefully picked with the practice of market neutrality. Scopia Capital’s investment strategy turned out to be very productive delivering 11% in 2013, followed by a return of 12% in 2014. Let’s take a look at the fund’s more recent return figures.

For instance, its Scopia PX fund delivered 11.1% in 2013 and 8.1 in 2014.  It’s Scopia Long LLC fund brought back an eye-popping return of 41.18% in 2013, followed by an 11.70% gain the next year. It continued to deliver a positive return in the following year, achieving 1.40% in 2015, 5.87% in 2016, an impressive 17.62% in 2017. Last year through October, Scopia Long LLC fund managed to stay positive, bringing 1.28%. Its total return amounted to 348.16% for a compound annual return of 11.53%, while its worst drawdown was 42.14.

It’s Scopia Health Care LLC fund, which focuses on the companies related to the healthcare industry, brought back 4.16% in 2015,  and 4.49% in 2016. Then, the next year was more favorable for the fund in terms of performance, with Scopia Health Care LLC delivering a solid 21.89%. 2018 brought some challenges as the fund lost 0.83% through October 2018. Its total return was 31.56%, for a compound annual return of 8.36%, whereas its worst drawdown stood at 11.78.

Insider Monkey’s mission is to identify promising (and also terrible) hedge fund stock pitches and share them with our subscribers. We launched a long activist investing strategy in our monthly newsletter 2 years ago. This strategy’s stock picks returned 61% in 2 short years, vs. a gain of 21% for the S&P 500 Index ETF (SPY). Last October we shared one of our stock picks, Ascendis Pharmaceuticals (ASND), in a free sample issue of our monthly newsletter (you can still download it free of charge). The stock doubled in less than 5 months. We have also been very successful at identifying stocks that will decline even in a bull market. We launched our short strategy a little more than 2 years ago and share our short stock picks in our quarterly newsletter. This strategy’s picks lost 27.5% since then, vs. a gain of 25% for the S&P 500 Index. This means our short strategy actually outperformed the market by 52.5 percentage points (let us know if you don’t understand how the outperformance for a short strategy is calculated). Last week our monthly newsletter identified another undervalued stock that is expected to increase its earnings by more than 10% annually and trades at only 10 times its 2019 earnings. We expect this stock to return 60% in the next 12-24 months. Email us if you are interested in this stock or subscribe here.

At the end of the fourth quarter of 2018, Scopia Capital’s equity portfolio had a market value of $2.95 billion, which represents a decrease of 43% from one quarter earlier, when its portfolio was valued around $5.2 billion. During the fourth quarter, the fund added 4 new positions, while also dumping 14 companies. Among its top 10 positions was one in a Dutch semiconductor manufacturer, NXP Semiconductors NV (NASDAQ:NXPI, which is one of the 30 Most Popular Stocks Among Hedge Funds, ). This is a company with a market cap of $27.14 billion that is trading at a price-to-earnings ratio of 13.40. The fund raised its stake in it by 4.37% to 1.76 million shares, attaining a position that was valued on December 31, 2018, at $129.03 million.

On the next page, you can read further about Scopia Capital’s biggest fourth quarter portfolio positions and most important changes.

The largest position, occupying 11.36% of it, at the end of Q4 2018, was in Spirit AeroSystems Holdings, Inc. (NYSE:SPR). After the fund had lowered its stake in it by 14%, the position was worth $334.91 million, on the account of 4.65 million shares. Spirit AeroSystems Holdings is the biggest first-tier aerostructures manufacturer in the world with a market cap of $10.31 billion. This Wichita-based company is known for manufacturing a few important parts of Boenig aircraft. Over the last six months, the company’s stock gained 14.32%, and on February 26th it had a closing price of $97.26. It is trading at a price-to-earnings ratio of 17.20. For the full 2018, the company reported revenue of $7.2 billion, which represents an increase of 3% on a year to year basis, and adjusted earnings per share of $6.26, up by 17% from 2017. When it comes to the fourth quarter of 2018, Spirit AeroSystems Holdings had revenue of $1.8 billion, which is 7% higher than in the same quarter of 2017, and adjusted earnings per share of $1.85, up by 40% from the fourth quarter in 2017. In the same financial report, the company also announced the full year 2019 guidance claiming revenue of $8.0-$8.2 billion, and adjusted EPS of $7.35-$7.60, when not counting the effect of the potential Asco acquisition. At the beginning of February, Sanford C. Bernstein restated its ‘Outperform’ rating on Spirit AeroSystems Holdings’ stock, raising its price target to $112.00 from $102.00, while Credit Suisse Group also repeated ‘Outperform’ rating on the stock, boosting its price target to $103.00 from $96.00.

The second and the third largest stake in Scopia Capital’s portfolio at the end of the fourth quarter of 2018 were those in Vistra Energy Corp (NYSE:VST), and Itron, Inc. (NASDAQ:ITRI). In Texas-based energy company with a market cap of $13.19 billion, Vistra Energy, the fund held $306.12 million worth a position, on the account of 13.37 million shares. And, in Itron, a technology company that provides various services and products for water and energy resource management, the fund held a stake that counted 5.09 million shares with a value of $240.54 million. Itron has a market cap of $2.43 billion, and it is trading at a price-to-earnings ratio of 27.64.

Equitrans Midstream Corp (NYSE:ETRN) was the fund’s biggest new addition to its portfolio, during the fourth quarter of 2018. Scopia Capital acquired 7.09 million Equitrans Midstream’s shares, in that manner, establishing a position that was worth $141.88 million, amassing 4.81% of the fund’s equity portfolio.  This is one of the biggest natural gas gatherers and transmission pipeline operators in the US, with a market cap of $4.68 billion. It is trading at a price-to-earnings ratio of 17.4, and on February 26th, it had a closing price of $18.49. The other two largest new positions the fund obtained in already mentioned NXP Semiconductors NV (NASDAQ:NXPI) and Qorvo Inc (NASDAQ:QRVO). Its position in Qorvo included 2.11 million shares outstanding, with a value of $128.32 million.

Out of 14 stakes Scopia Capital decided to drop during Q4 2018, the biggest ones were in ARRIS International plc (NASDAQ:ARRS), Mallinckrodt PLC (NYSE:MNK), and EQT Corporation (NYSE:EQT). The fund sold out 9 million ARRIS’ shares, with a value of $233.91 million, and 4.72 million shares of Mallinckrodt, which were worth $138.48 million. As for its position in EQT Corporation, it counted 2.37 million shares, which carried a value of $104.99 million.

Disclosure: None

This article was originally published at Insider Monkey.