Here’s Why You Should Check Out Nantahala Capital Management’s Picks

In Dolby Laboratories, Inc. (NYSE:DLB), Nantahala held 902,500 shares worth $47.30 million at the end of March. The company’s stock has gained 13% since the beginning of the year and is up by over 67% since the fund initiated a stake in the company during the fourth quarter of 2011. In 2011, Dolby’s stock slid by over 54% as investors became concerned about a slowdown in PC sales. However, the subsequent recovery of the stock shows that those concerns were premature.

Dolby managed to unlock new revenue streams in the mobile segment, thanks to Apple Inc. (NASDAQ:AAPL) devices beginning to support Dolby Audio, and the company is working to integrate the technology with Android devices. As the company earns a small fee from each device sold through the licensing of its technology, the growth potential should be strong. Another catalyst that could boost the company’s stock value is its imaging technology, Dolby Vision, which will become more popular once Ultra HD 4K TVs start to gain traction. Overall, there were 22 funds from our database holding shares of Dolby Laboratories, Inc. (NYSE:DLB) at the end of March, down from 33 funds a quarter earlier. Aside from Nantahala, another shareholder of the company is Brian Ashford-Russell and Tim Woolley’s Polar Capital, which reported ownership of 1.69 million shares in its latest 13F filing.

Yahoo! Inc. (NASDAQ:YHOO) represented Nantahala’s second-largest position at the end of the first quarter. The fund disclosed a $44.11 million position that contained 950,425 shares in its latest 13F filing, up by 7% over the quarter. Yahoo! Inc. (NASDAQ:YHOO)’s stock is 31% in the green so far this year. As Yahoo! Inc. (NASDAQ:YHOO) expects to close the sale of its core assets to Verizon Communications Inc. (NYSE:VZ) for $4.40 billion in mid-June, some analysts believe that the stock is still undervalued.

The company is expected to monetize on its key assets, such as its $47 billion stake in Alibaba Group Holding Ltd (NYSE:BABA), which values its assets at around $71 per share, according to Brett Harriss of Gabelli & Co, as quoted to Barron’s. UBS has also recently raised its price target on Yahoo! Inc. (NASDAQ:YHOO) to $58 from $50, citing the tax efficiency that the company will focus on while dealing with its 15% stake in Alibaba and 35% stake in Yahoo Japan. Among the funds tracked by us, the number of investors bullish on Yahoo! Inc. (NASDAQ:YHOO) inched down by one to 82 during the first three months of 2017. Jeff Smith’s Starboard Value held 12.30 million shares of the company at the end of March.

Last but not least, in FirstCash Inc (NYSE:FCFS) Nantahala held 883,772 shares worth $43.44 million heading into the second quarter. The fund was one of the 12 investors in our database that had collectively amassed 6.90% of the company’s outstanding stock at the end of March. Aside from Nantahala, another shareholder of FirstCash Inc (NYSE:FCFS) is Amy Minella’s Cardinal Capital, which disclosed holding 969,942 shares in its most recent 13F filing.

Shares of the operator of retail-based pawn shops have advanced by 14.4% since the beginning of 2017. Last year, First Cash Financial Services, Inc. and Cash America completed their merger of equals, creating a larger and more geographically diversified company. With First Cash bringing to the table its operations in Latin America, mainly in Mexico, the company has also become more exposed to other currencies, notably the Mexican peso. Nevertheless, the company’s latest financial results were better than expected. FirstCash Inc (NYSE:FCS) posted EPS of $0.77 for the fourth quarter, beating estimates by $0.01, while revenue of $462.04 million surged by 141.4% on the year (due to the merger) and topped estimates by $10.4 million.

Disclosure: None