Small-cap stocks usually fail to get the attention of the markets, but our research shows that if these stocks are picked with the right strategy, they can deliver huge profits. For example, the Russell 2000 ETF (IWM) has outperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of June. Given their 2 and 20 payment structure, hedge funds have more resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
More recently the top 30 mid-cap stocks (market caps between $1 billion and $10 billion) among hedge funds delivered an average return of 18% during the last four quarters (S&P 500 Index funds returned only 7.6% during the same period). In this article, we will go even smaller and talk about the five stocks (with less a billion dollars in market value) that billionaires in our database are bullish on.
PHH Corporation (NYSE:PHH)
A total of 5 billionaires from our list of 64 billionaires were long PHH Corporation (NYSE:PHH) at the end of the third quarter, up from 3 billionaires a quarter earlier. The stock is down over 11% year-to-date. The New Jersey-based financial services company reported third quarter loss of $0.35 a share, worse than the estimates of $0.16 a share, while revenue of $197 million also fell short of the projected $198.67 million. PHH was recently fined $28 million for discrepancies in mortgage foreclosures, origination and servicing practices. Larry Robbins’ Glenview Capital owns 4.72 million shares of the company as of the end of the third quarter.
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Follow Phh Corp (NYSE:PHH)
ChipMOS Technologies (Bermuda) Ltd (NASDAQ:IMOS)
A total of 4 billionaires in our data had amassed $144.97 million worth of shares of ChipMOS Technologies (Bermuda) Ltd (NASDAQ:IMOS) at the end of the third quarter. The stock has gained 2,306% in value since the start of the year. The Taiwan-based company earned $0.01 per share in the third quarter on $160.4 million revenue, above the forecasts of $0.23 EPS and $157.2 million revenue. The company will halt trading at the Taiwan Stock Exchange on November 30 because it has some pending material information which will be announced after the market close on Wednesday. Seth Klarman’s Baupost Group owns 3.75 million shares of ChipMOS Technologies (Bermuda) Ltd (NASDAQ:IMOS), as of the end of the third quarter.
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Follow Chipmos Technologies Bermuda Ltd (NASDAQ:IMOS)
On the next page, we will discuss the rest of the small-cap stocks which have the attention of famous billionaires.
Healthways, Inc. (NASDAQ:HWAY)
The number of billionaires interested in Healthways, Inc. (NASDAQ:HWAY) jumped to 4 as of the end of the third quarter from just 1 from the last quarter. The stock is up over 79% year-to-date. The Tennessee-based health and fitness company reported third quarter EPS of $0.30 on $125 million revenue, compared to the consensus estimate of $0.52 EPS and of $124.71 million revenue. Earlier this month, investment firm UBS upgraded the company to ‘Buy’ from ‘Sell’ and set a price target of $24. A total of 19 hedge funds out of 742 funds in our database were bullish on Healthways, Inc. (NASDAQ:HWAY) at the end of the third quarter.
Follow Tivity Health Inc. (NASDAQ:TVTY)
Follow Tivity Health Inc. (NASDAQ:TVTY)
Conyers Park Acquisition Corp. (NASDAQ:CPAA)
No billionaire was interested in Conyers Park Acquisition Corp. (NASDAQ:CPAA) in the second quarter, but in the third quarter, things took a turn as 4 billionaires in our list reported ownership of $82.59 million worth of shares of the company. Park Acquisition is a type of Special Purpose Acquisition Company that are established to acquire a business within a set period of time or else the funds are returned back to shareholders. In recent 13F filings, investment fund Baupost Group disclosed ownership of stakes in Park Acquisition Corp. (NASDAQ:CPAA). At the end of the third quarter, 19 funds tracked by Insider Monkey had own positions in Conyers Park Acquisition Corp. (NASDAQ:CPAA), while no fund had any position in the company at the end of the second quarter.
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Follow Conyers Park Acquisition Corp.
Nimble Storage Inc (NYSE:NMBL)
At the end of the third quarter, 4 billionaires in our database were bullish on Nimble Storage Inc (NYSE:NMBL), compared to just 1 billionaire a quarter earlier. The California-based flash storage technology company reported a third quarter loss of $0.18 per share, in-line with the consensus estimate. Revenue in the period totaled to $102 million, versus the consensus estimate of $101.99 million. In the fourth quarter, the company expects per share loss of $0.13-$0.15, versus the consensus of $0.12 per share loss. Jim Simons’ Renaissance Technologies owns 4.58 million shares of Nimble Storage Inc (NYSE:NMBL), as of the end of the third quarter.
