HypeZero10 Returns 17.1% Last Quarter

For those investors new to HypeZero, we run an automated portfolio of 10 of the best investment ideas from the best hedge funds called HypeZero10.

We take the quarterly holdings of the best hedge funds, and then run our sophisticated algorithm on those holdings to pick the 10 ideas.

This algorithm has returned over 199+% since 2004 exclusive of dividends. A $10,000 investment would be worth almost $30,000 in over 8 years.

For the November 15th to February 15th quarter, HypeZero10 returned 17.1% as compared to 12.9% for the S&P.

Here are the results:

Company Price (Nov 15) Price (Feb 15) Hedge Fund 
Apple Inc. (AAPL) $525.62 $460.16 David Einhorn
Sears Holdings Corporation (SHLD) $58.48+spinoffs $47.33 Edward Lampert
AIG (AIG) $31.24  $38.35 Bruce Berkowitz 
Yahoo! Inc. (YHOO) $17.89  $21.02 Dan Loeb
Procter & Gamble Co. (PG) $66.32  $76.54 Warren Buffett 
AutoNation Inc. (AN) $40.28  $46.03 Edward Lampert 
BankUnited, Inc. (BKU) $22.16  $27.57 Wilbur Ross
News Corp. (NWSA) $23.12  $28.90 Donald Yacktman 
Assured Guaranty Ltd. (AGO)  $12.88  $19.61 Wilbur Ross
Canadian Pacific Railway Limited (CP) $90.38 $118.87 William Ackman
Return  S&P Return   12.9%

Check out new holdings for the February 15th quarter at HypeZero10

Disclosure: I am long AIG

Revisiting Sears Spin-offs

I have written a couple of articles on the two Sears (SHLD) spin-offs, Orchard Supply Hardware (OSH) and Sears Hometown and Outlet (SHOS). I have received a lot of inquiry on what I thought of both of these companies after third quarter results came out. So, here is my analysis.

Orchard Supply Hardware

I am still short OSH. It has been one of my profitable investments this year. I shorted a little below $14 and covered around $8.50 before the third quarter results came out. Then I shorted again after the results at $7.30.

My original thesis still remains intact:

  • Small fish in a very competitive marketplace.
  • Still struggling to maintain financial covenants.
  • Unprofitable.

Third quarter results were horrible. Same store sales were essentially flat. However, margins were horrible even if you excluded the $72 million impairment charge. The company is not in compliance with its financial convenants and will not be in February, the next measurement date. 

The company is trying to turn it around by remodeling existing stores. However, this process is slow and a majority of the stores are still old.

The only thing that can save this company is the life in the housing economy. But as the third quarter results showed, this help has not been enough.

I plan to keep this short because I don’t believe this company has a future.

Sears Hometown and Outlet

I have a small short position in SHOS, but I am not as confident about this short as OSH. There are some good things about this company.

  • It is profitable.
  • It trades at a decent valuation. Around 10 times this years earnings.

The main reason for my short is that I still have not seen top line growth. As I mentioned in my previous article, the profitability improvement is due to margin improvements by cutting costs and converting to franchise stores. That can only last for so long.  

I don’t have much hope for Sears Hometown, but Sears Outlet is the wild card. It has seen strong same store sales growth over the last couple of years and has a unique business model. However, in the third quarter it was Sears Hometown with strong same store sales numbers and Sears Outlet with negative same store sales numbers.

I am curious to see how the numbers compare in the first quarter of 2013 before I decided to close my short or increase it.

I will keep you guys updated.

Disclosure: I am short OSH and SHOS

Sears, Genie, and IPOs

Lot of upcoming events and most of them are this week…

Sears

Sears (SHLD) , which owns 95.5% of Sears Canada, will distribute about 44.5% of its interest to its shareholders. The distribution will be made on November 13 to shareholders of record on November 1. For every one share of Sears, investors will receive 0.4283 share of Sears Canada. The current price of Sears Canada is $11. So, investors will receive almost $5/share in distribution. After the distribution, Sears will still maintain 51% ownership in Sears Canada.

Read article on Sears here.

Genie

Genie (GNE) Preferred will start trading tomorrow, Wednesday, October 24th on the NYSE under the symbol GNEPRA. Only 1,604,591 (7.5% of outstanding Class B) shares were validly tendered. It should be interesting to see how these trade.

Read article on Genie here.

Dean, Lehigh

Dean (DF) spin-off, WhiteWave (WWAV) will begin trading this Friday, October 26th. I expect it to price at the high range just because of the interest in the healthy food segment and low float.

Read our full analysis on Dean here

Lehigh Gas Partners LP (LGP) will also start trading this Friday, October 26th.  

Read our full analysis on Lehigh here.

Disclosure: I am long DF.