U.S. Markets open in 6 hrs 12 mins

Simcoe Capital Management’s Top Stock Picks

Sieni Kimalainen

Simcoe Capital Management was founded in 2003 by Jeffrey Jacobowitz. He remained the fund’s Managing Partner and Portfolio Manager, and is also the manager and founder of Simcoe Partners. Mr. Jacobowitz holds a BA in Economics from the University of Maryland (UMBC). Before launching his own fund, Jacobowitz worked as a senior accountant at Deloitte & Touche, research analyst and managing director at Robotti & Company, and research analyst at Private Capital Management. Since the inception of Simcoe Capital Management he has been holding positions at different companies and funds. Since 2009, he was Independent Director at Telular Corporation, and a director of Alloy LLC as well. In 2017 he held the position of Director at Exar Corporation for several months, and since August 2018 he has been working as an Incoming Investment Banking Analyst at Guggenheim Partners. Regarding his own fund, Jeffery Jacobowitz decided to focus on small- and mid-cap companies, applying different investment techniques, such as short selling and the purchase and sale of options on securities and use of leverage. The fund’s portfolio is a concentrated one, typically holding no more than 10 to 15 positions.

Throughout the last several years, Simcoe Capital Management has been returning mostly positively, with the exception of 2018. In 2014 the fund delivered a gain of 6.0%, followed by 5.1% in 2015 and 5.6% in 2016, while 2017 brought a slight rise to 14.7%. The fund lost 8.5% in 2018, and in 2019 through June, it seems to be coming back with a strong 19.6% gain. With an annualized return of 13.0%, the fund seems to have been choosing the right stocks.

Jeffrey Jacobowitz Simcoe Capital

Insider Monkey’s mission is to identify promising (and also terrible) hedge fund stock pitches and share them with our subscribers. Our long strategy is based on the consensus picks of the 100 best performing hedge funds. This strategy was launched 5 years ago and generated a cumulative return of 115%. You can think of it as a mutual fund that returned 16.2% annually over the last 5 years, vs. 11.1% annual gain for the S&P 500 ETF (SPY). Basically we outperformed the S&P 500 Index by 5 percentage points annually by identifying the top stock picks of the best hedge fund managers (see the details here).

Our short strategy is based on shorting hedge fund hotels that are likely to experience large hedge fund sales during market weaknesses. We launched this strategy in February 2017. It’s been almost 2.5 years and the stock picks of this strategy lost a cumulative 24.7% vs. a cumulative gain of 30.8% for the S&P 500 ETF. This is an absolutely mind blowing performance. The annualized return of our short picks is -11.2%, vs. 11.8% annualized gain for the S&P 500 Index during the same period. The annual alpha of this strategy is 23 percentage points. Jim Chanos doesn’t generate this kind of performance. The best thing about this short strategy is that it provides an excellent hedge during market meltdowns. For example, in Q4 of 2018 when the S&P 500 Index lost nearly 14%, this strategy’s picks lost 25% protecting our premium subscribers from large losses.

Our newsletters are successful because we follow hedge fund managers like Jeffrey Jacobowitz to identify the best and worst hedge fund stock picks. In this article we are going to take a look at Simcoe Capital Management’s top stock picks.

At the fifth place of Simcoe Capital Management’s most valuable stocks in Q1 2019 was SeaWorld Entertainment Inc (NYSE:SEAS). The fund boosted this position by 151% compared to the previous quarter, raising it from the 12th place in the fund’s portfolio. As for other investors, a total of 27 hedge funds were bullish on the stock, which is a decrease of 7% compared to Q4 2018. Among them, Hill Path Capital held the most valuable stake, worth $360.4 million. The following were Renaissance Technologies, D E Shaw, Point72 Asset Management, and Balyasny Asset Management, as you can see more detail here.

Even though being boosted by 10% in Q1 2019, Donnelley Financial Solutions Inc (NYSE:DFIN) remained at the fourth place in Simcoe Capital Management’s portfolio. A total of 14 hedge funds were investing in the stock, which is a decrease of 36% compared to the previous quarter. Among them, Simcoe Capital Management was the company’s top shareholder, holding 2,701,643 shares worth $40.2 million, comprising 10% of the fund’s portfolio. Among other Donnelley Financial Solutions Inc’s top shareholders were D E Shaw, Citadel Investment Group and Royce & Associates.

At the third place of Simcoe Capital Management’s most valuable positions for Q1 2019 was ON Semiconductor Corporation (NASDAQ:ON). The company remained on this position in the fund’s portfolio since the last quarter, even though it was boosted by 12%. Hedge funds seem to be more interested in the company, since a total of 39 hedge funds were bullish on it, which is an increase of 34% compared to the previous quarter. Blue Harbour Group was the company’s largest shareholder in Q1 2019, holding a stake worth $81.9 million. Arrowhstreet Capital was at the second place, followed by Millennium Management, Citadel Investment Group, and AQR Capital Management (read more detail here).

The second most valuable position in the fund’s portfolio for Q1 2019 was Nexstar Media Group, Inc. (NASDAQ:NXST). The fund boosted the position by 2%, and it remained at the second place. At the end of the first quarter, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a decrease of 9% compared to the previous quarter. The company’s top shareholder was Windacre Partnership, holding $186.5 million worth of stock. The following were P2 Capital Partners, Park West Asset Management, Hound Partners, and Baupost Group (see more detail here).

Finally, the fund’s top stock pick for Q1 2019 was Altice Usa Inc (NYSE:ATUS), cable television provider, remaining at the top of the fund’s portfolio since the previous quarter, and being boosted by 2%. At the end of the first quarter 2019 a total of 52 hedge funds were interested in the company, which is a decrease of 16% compared to the previous quarter. Among them, the top shareholder was Soroban Capital Partners, holding $429.6 million worth of stock. Other top shareholders of Altice Usa Inc were Citadel Investment Group, Renaissance Technologies, and Pelham Capital.

Disclosure: None.