Daruma Capital's Q1 and Q2 2019 13F filings: A comparison of the firm's portfolio restructuring and investment philosophy

In the business world, investing in stocks and bonds is a common practice among companies to make a profit. Different types of mutual funds and investment firms are also established to earn on behalf of clients. Accordingly, mutual fund companies are required by law to disclose their investments every quarter, which is referred to as the 13F filing. Daruma Capital Management LLC is among those investment firms that filed their 13F filings for Q1 and Q2 of 2019. This article shall be further discussing the comparison between Daruma Capital’s Q1 and Q2 13F filings, including the changes in holdings of the fund.

Daruma Capital Management LLC is an investment firm that was established in 1995, specializing in selecting stocks on behalf of their clients. They aim to build a long-term relationship with their clients by providing customized investment services for their clients. According to the Q1 2019 13F Holdings Comparison, Daruma Capital Management had an overall value of holdings amounting to $907,804,000, with top holdings that include Aerie Pharmaceuticals, Inc., Plug Power Inc., and Tandem Diabetes Care, Inc. The table shows the company’s investment in various industries, such as healthcare, information technology, and consumer discretionary.

Contrarily, Daruma Capital’s Q2 2019 13F filings show a drastic change in their holding. The total investment value declined to $0, and almost all of the company’s holdings were sold in Q2. For instance, the company sold its holdings of Aerie Pharmaceuticals, Inc. and Plug Power Inc. altogether. Furthermore, Daruma Capital also sold all of its shares in Planet Fitness Inc., which was their top holding in Q1 2019. Costar Group, Inc., known for its real estate information and marketing services, and Kratos Defense & Security Solutions Inc., a security systems provider, were also disposed of by the company.

It appears that Daruma Capital’s portfolio restructuring is due to the company’s investment philosophy, which focuses on value investing. Value investing is a strategy that involves buying stocks that are priced below their intrinsic value. It is a long-term investment approach based on the belief that the stock market often undervalues good companies, and their true potential will eventually be realized over time. This is similar to the buy-and-hold approach, where investors hold onto stocks for a more extended period, irrespective of the indication in the market.

According to Daruma Capital’s website, their investment approach prioritizes a company’s intrinsic value over the current price of their stock. The company’s investment managers seek out stocks with hidden value, or what they call the “diamonds in the rough.” After a careful selection process, the company’s managers then proceed to buy shares of the company at a price they believe is lower than its intrinsic value. The company intends to hold onto these stocks for an extended period, usually years, waiting for the market to recognize their true value. Once that happens, the stocks’ price rises, and the company can then sell them at a profit.

It is possible that Daruma Capital might have found new investment opportunities to replace their previous holdings. But they have not as yet disclosed any significant holdings for Q2 2019. As a registered investment advisory firm, the Securities and Exchange Commission (SEC) requires Daruma Capital to disclose its holdings in publicly traded securities for each quarter, and we can be sure that they are actively searching for new investment opportunities. It is expected that in the next quarter, Daruma Capital will disclose a new set of holdings that they have acquired.

In conclusion, the comparison between Daruma Capital’s Q1 2019 and Q2 2019 13F holdings clearly indicates the portfolio restructuring of the firm. The Q2 filings show the complete disposal of their holdings, and consequently, the overall value of their portfolio. The company’s investment philosophy emphasizes value investing, seeking stocks with hidden value and holding onto them for an extended period to realize their intrinsic value. It is possible that Daruma Capital might have found new investment opportunities, but we shall only know about them once they release their Q3 filings. Nonetheless, Daruma Capital’s portfolio restructuring emphasizes the vital role of portfolio management and diversification in the investment industry.