Apex Capital is a San Francisco-based long/short equity fund founded by Sanford J. Colen in 1995. The fund recently filed its 13F with the Securities and Exchange Commission (SEC) for the reporting period of June 30. According to the filing, the fund’s public equity portfolio at the end of the second quarter constituted 48 positions worth over $1.15 billion. Consumer discretionary, healthcare, and information technology were the fund’s top sectoral picks for the quarter, with stocks from these accounting for 30%, 27%, and 21% of the fund’s equity portfolio respectively. The filing revealed that during the April-June period Apex Capital initiated a position in ten stocks, increased its position in 17 stocks, reduced its stake in 21 stocks, and liquidated its entire holdings in 14 previously-held stocks. In this article we are going to analyze Apex Capital’s three biggest tech bets heading into the third quarter: Netflix, Inc. (NASDAQ:NFLX), MicroStrategy Incorporated (NASDAQ:MSTR), and Cornerstone OnDemand, Inc. (NASDAQ:CSOD).
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Netflix, Inc. (NASDAQ:NFLX) continued to remain Apex Capital’s top pick, even though the fund sold 441,700 shares of the company during the second quarter. This large share sale can mostly be attributed as profit booking, as shares of Netflix, Inc. (NASDAQ:NFLX) have had an unprecedented rise in 2015, up by 57.7% during the second quarter alone. As of June 30, Apex owned over 1.19 million shares of Netflix, Inc. (NASDAQ:NFLX) worth $111.9 million. It’s interesting to note that the fund’s stake in Netflix, Inc. (NASDAQ:NFLX) at the end of June was still worth more than its stake in the company at the end of March. The company again managed to surprise Wall Street by reporting much better than expected numbers for the second quarter on July 15. Revenue for the quarter was up by 22.7% year-over-year to $1.65 billion, while adjusted EPS of $0.06 came in above analysts’ expectation of $0.04. During the second quarter, Netflix, Inc. (NASDAQ:NFLX) added 3.3 million subscribers, bringing its total subscriber count to an all-time high of 65 million. Karthik Sarma‘s SRS Investment Management increased its position in the company by 400% during the first quarter. However, legendary activist investor Carl Icahn recently tweeted that he had sold his entire stake in Netflix, Inc. (NASDAQ:NFLX).
Moving on to Apex Capital’s second top tech pick, MicroStrategy Incorporated (NASDAQ:MSTR), the fund reduced its stake in the analytics company by 17% during the second quarter to 261,850 shares. As of June 30, Apex Capital’s stake in MicroStrategy Incorporated (NASDAQ:MSTR) was worth $44.54 million. Although shares of MicroStrategy Incorporated (NASDAQ:MSTR) have traded mostly in the $160-$180 range throughout 2015, they convincingly broke that range to make their 52-week high of $207.27 on July 28, backed by the solid second quarter results the company posted after the market closed on July 27. For the second quarter, MicroStrategy Incorporated (NASDAQ:MSTR) reported EPS of $1.95 on revenue of $132.94 million, which were significantly above analysts’ estimates of EPS of $1.39 on revenue of $128.84 million. With over 880,000 shares, Ricky Sandler‘s Eminence Capital was the largest shareholder of MicroStrategy Incorporated (NASDAQ:MSTR) at the end of March, among the hedge funds we track.
Cloud-based talent management software provider Cornerstone OnDemand, Inc. (NASDAQ:CSOD) was Apex Capital’s third-largest tech holding at the end of June. The fund made an additional purchase of 59,500 shares of OnDemand, Inc. (NASDAQ:CSOD) during the quarter, thereby increasing its total holding to 917,200 shares which were worth almost $32 million at the end of the first half of the year. Shares of OnDemand, Inc. (NASDAQ:CSOD) rose by 20.5% during the second quarter, fueled by the better than expected first quarter results and an increase to its full-year revenue guidance. On July 29, Needham & Company analyst Scott Berg, released a note to clients in which he reiterated his ‘Strong Buy’ rating on the stock and increased his price target to $45 from $40, which represents 27.4% potential upside from the stock’s current trading price of $35.40. For the second quarter of 2015, analysts expect OnDemand, Inc. (NASDAQ:CSOD) to report an EPS loss of $0.10, a reduction of over 66% from the EPS loss of $0.31 that it reported for the same quarter last year. Ricky Sandler’s Eminence Capital was again the largest shareholder of the company within our database at the end of March, followed by Israel Englander‘s Millennium Management.
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