Back in 2000, Dr. Ronald Eric Gutfleish founded Elm Ridge Capital. The firm is a value-oriented investment manager that typically invests in the public equity market. With its headquarters located in Irvington, New York, it provides its services to high net worth individuals, pooled investment vehicles, pension and profit sharing plans, and other investment advisers.
Dr. Ronald Eric Gutfleish, Ron, Ph.D., is currently Elm Ridge Capital's Portfolio Manager. He graduated, Magna Cum Laude from Brown University in Applied Maths and Economics and received a Ph.D. from the University of California Berkeley in 1987. Dr. Gutfleish has previously served at Omega Advisors and was the Chief Investment Officer at HPB Associates. Before that, he was a Managing Director at Goldman Sachs Asset Management where he served in the positions of Head of the active value team, Senior Portfolio Manager for the broad market and mid-cap institutional strategies, income, and balanced mutual fund strategies. Additionally, Dr. Gutfleish has served as Partner and Analyst at Sanford C. Bernstein & Co. in the investment management research department.
Elm Ridge Capital follows a value investment strategy of purchasing assets at prices which are believed to be undervalued by the market due to visible near-term problems, or because of investor uncertainty or overreaction to present business conditions. For this purpose, the firm employs a combination of fundamental research, as well as the use of technical, analytical tools and approaches. At times utilizing leverage, the firm may additionally use other investment strategies such as buy and hold, options trading, short selling and arbitrage transactions depending on the type of security it pursues. With the use of this strategy, Elm Ridge Capital Management aims to build a balanced long-short portfolio, in which its positions have significant potential for appreciation.
Its Elm Ridge Capital Partners, Series A fund has been subject to fluctuating results over the past five years. In 2013, it acquired an annual return of 22.34%. However, in 2014, the fund lost 1.26% followed by another down year in 2015 when it brought a loss of 29.84%. For 2016 it seemed to be back on its feet as it brought back 24.55%, but the positive tendency didn't continue in 2017 when it lost 23.13%. From January through October 31st, 2018 the fund had achieved a return of 9.57%. Elm Ridge Capital Partners Series A fund total return amounted 286.62% with a compound annual return of 7.48 %. Its worst drawdown was at 42.65.
As of December 31, 2017, Elm Ridge Capital had approximately $380.29 million in regulatory assets under management on a discretionary basis, as disclosed on the firm's Plain Brochure.Their last reported 13F filing for Q4 2018 included a 13F portfolio with thirty-two managed securities valued at $168.98 million. Its top 10 holdings constitute 56.86% of the portfolio value.
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 . We take a closer look at hedge funds like Elm Ridge Capital in order to identify their best and worst ideas.
Elm Ridge Capital's largest holding as of December 31st, 2018 was Chromcraft Revington Inc (NYSE:CRC) with 1,023,821 shares worth $17.45 million. This stake constitutes 10.32% of the fund's portfolio value. Chromcraft Revington is a company dedicated to designing, manufacturing, and selling of residential and commercial furniture in the U.S. and Canada.
The second largest position is Assured Guaranty LTD (NYSE:AGO) with 354,988 shares assessed in $13.59 million. Assured Guaranty is a company that provides credit protection to public finance and structured finance markets in the United States and other countries. It ensures diverse debt obligations, including bonds issued by the United States state or municipal governmental authorities. Find more details about Elm Ridge Capital's portfolio changes on the following page.
At the end of the fourth quarter of 2018, the fund acquired seven new positions in its equity portfolio. Among the new acquisitions is United Rentals Inc (NYSE:URI), where the fund purchased 90,377 shares valued at $9.27 million. United Rentals Inc. is one of the largest equipment rental companies for the construction and industrial sectors in the USA and all over the world.
Another valuable addition was Flex Ltd (NASDAQ:FLEX) with 569,187 shares purchased worth $4.33 million. Flex Ltd offers electronic manufacturing services to clients all over the world. The company develops original design manufacturing products for diverse industries such as aerospace and defense, digital health, lighting, housing, industrial, and communication.
Furthermore, the fund decided to boost its investment in several of its holdings. For instance, it raised its stake in Denbury Resources Inc (NASDAQ:DNR) by 72% to 4,741,523 shares worth $8.11 million and by 58% in Houghton Mifflin Harcourt (NASDAQ:HMHC) acquiring 286,523 shares valued at $ 2.54 million.
On the other hand, Elm Ridge Capital seemed to be losing interest in some of its positions. It reduced its stake in seventeen and dumped two. Some of those are among the most popular stocks among hedge funds. For instance, it lowered its stake by 43% in Citygroup Inc (NYSE:C) to 91,286 shares worth $4.75 million. It also trimmed its investment in Popular Inc (NASDAQ:BPOP) by 24% leaving it in 111,263 shares valued at $5.25 million.
Finally, the fund decided to say goodbye to its stake in Bank of America Corp (NYSE:BAC) where it used to hold 174,130 shares with a value of $5.13million and its 205,382 shares in Resolute Energy Corp (NYSE:REN) assessed in $7.77 million.
This article was originally published in Insider Monkey .