Mark N. Diker‘s Diker Management in 13G filings with the SEC has disclosed several changes from its equity portfolio. First off is the fund’s stake in Crossroads Systems Inc (NASDAQ:CRDS), which was increased to 1.58 million shares representing 8.02% of the company’s outstanding common stock from 1.23 million shares held earlier. Next in line is Selectica Inc (NASDAQ:SLTC), whose stake was inched up to 794,497 shares, which represent 9.99% of the outstanding stock. Visualant, Incorporated (OTCMKTS:VSUL) has also gained the fund’s attention, as Diker disclosed a new position containing 10.5 million shares equal to 5.95% of the company. Lastly, Diker also raised its exposure to Cyren Ltd (NASDAQ:CYRN) to about 1.99 million shares, equal to 6.27% of the common stock from 1.63 million shares disclosed earlier.
Founded in 2002, Diker Management generally invests in companies with a market capitalization between $25 million and $750 million. However, an exception to the rule is the fund’s stake in Apple Inc. (NASDAQ:AAPL), which is its second largest holding as of the end of 2014. Most of the fund’s stakes are in the technology sector, which constitutes about 61% of the equity portfolio’s value. Total assets under management amount to around $700 million, while the market value of Diker’s equity portfolio stood at $512.59 million towards the end of the fourth quarter.
Diker’s stake in Apple Inc. (NASDAQ:AAPL) remained unchanged during the fourth quarter at about 643,300 shares valued at $71.0 million. According to an investor letter by David Einhorn of Greenlight Capital, Apple Inc. (NASDAQ:AAPL)’s stellar 30% revenue growth in the December quarter owing to sales of iPhone 6 is slowly going to subside as the contribution of its blockbuster product in the company’s top line continues to slim. His expectations from Apple Watch were merely modest. However, Einhorn still believes that the tech giant is still undervalued and deserves what he calls a ‘premium multiple’. Greenlight held some 8.61 million shares of Apple Inc. (NASDAQ:AAPL) valued at $949.88 million at the end of 2014.
Diker Management’s focus on small-cap stocks is somehow in line with our own strategy. Through our research, we discovered that a portfolio of 15 most popular small cap picks of hedge funds beat the S&P 500 Total Return Index by nearly a percentage point per month between 1999 and 2012. On the other hand, the most popular large cap picks of hedge funds underperformed the index by 7 basis points per month during the same period. In forward tests since August 2012 through March 2015 top small-cap stocks beat the market by a hefty 79.4 percentage points (read the details here). Hence a retail investor needs to isolate himself from the herd and take advantage of the prevalent arbitrage opportunities in the market by concentrating on small-caps.
Let’s take a closer look at the companies in which Diker disclosed its latest moves. Crossroads Systems Inc (NASDAQ:CRDS) is a $46.79 million company that provides data storage solutions. The company delivered on its claim of being the most cost effective and scalable storage in the industry as it announced the release of the first cloud tape, StrongBox 3.0 in late March. Roth Capital initiated coverage on the company earlier this month with a ‘Buy’ rating and a price target of $4. Crossroads Systems Inc (NASDAQ:CRDS)’s stock is up about 4% year to date and the company has also spiked the interest of Ken Griffin, who holds a small holding of the company through his fund, Citadel Investment Group.
Diker added some 85,300 shares of Selectica Inc (NASDAQ:SLTC) as part of its latest acquisition. The company has also garnered the support of J Carlo Cannell and Jim Simons, among other investors. Their respective funds, Cannell Capital and Renaissance Technologies hold 355,920 shares and 108,514 shares respectively, according to their latest 13F filings. Selectica Inc (NASDAQ:SLTC) announced at the end of last month that it was going to acquire b-pack, a vendor specializing in purchase-to-pay technology, for $12.5 million in a cash and stock deal. Some of the areas in which b-pack’s solutions function are eProcurement, Asset Management, Purchase to Pay and Invoice Management.
Visualant, Incorporated (OTCMKTS:VSUL) provides disruptive light based technologies that make it possible to conduct types of analysis in the field that were much more time consuming and cost inefficient in the past since they had to be sent to large and expensive labs. This year the company announced its collaboration with a Chinese company, Yantai Dongrun a manufacturer of precise instrumentation and sensor products, which will be exploring opportunities for the commercialization of Visualant, Incorporated (OTCMKTS:VSUL)’s Visualant ChromaID technology.
According to its last 13F filing, Diker held 1.63 million shares of Cyren Ltd (NASDAQ:CYRN) valued at $2.80 million. Hence the latest acquisition amounts to about 363,100 shares. The stock of the $85.36 million technology company is up by about 90.12% year-to-date. Among the company’s investors that profited from this rise is Jim Simons’ Renaissance Technologies, which held about 500,730 shares of Cyren Ltd (NASDAQ:CYRN) at the end of 2014.
Disclosure: None
