JAT Capital is a global long/short equity hedge fund led by University of Chicago graduate John Thaler, which was founded in 2007. The Greenwich, Connecticut-based fund keeps a public equity portfolio of $3.72 billion distributed heavily in the Technology and Consumer Discretionary sectors, which account for over 90% of its public portfolio’s value. The fund proved to be extremely resilient during the financial crisis of 2008, losing 6.4% compared to the hedge fund average of 19%. The firm did however suffer major losses in 2012 and 2014 and last month, Thaler announced that he was going to return capital to investors and unwind his portfolio by the end of June. The reason as Thaler says is not the middling results lately, but rather that he wishes to spend more time together with his family. In any case, the firm will now focus on wealth management only of its own employees, transforming into a family office. Now then, let’s take a look at three small-caps that headed Thaler’s portfolio before it was (or will be) dismantled, namely Stratasys, Ltd. (NASDAQ:SSYS), Sinclair Broadcast Group Inc (NASDAQ:SBGI) and Zillow Group Inc (NASDAQ:Z).
A reader might question our decision to focus on the small-cap category, considering that its mostly the larger counterparts of these companies that head the portfolios of most hedge funds. The reason for our focus is simple. Our research has shown that in the period between 1999 and 2012 the top small-cap picks of hedge funds outperformed the broader market by nearly one percentage point per month, whereas the top overall picks (mostly large-caps) underperformed by seven basis points per month during the same period. Why pay high fees to own a glut of low-performing stocks when you can invest on your own in hedge funds’ best stock picks? Since its launch in August 2012, Insider Monkey’s small-cap strategy has outperformed the S&P 500 every year, returning over 142% since then, nearly 2.5 times greater than the S&P 500′s returns (read the details here).
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In digital printing company Stratasys (NASDAQ:SSYS), Thaler had increased his stake by 1,071% to 1.16 million shares with a value of $61.18 million as of March 31. The Minnesota-based 3D printer has experienced a terrible spring on the NASDAQ, with shares diving by 55.5% year-to-date and 63.79% over the last year, being squashed by currency fluctuations, declining product sales, and difficulties in the market for consumer 3D printing. The company earlier this spring laid off 100 of its 500 staff, referring to financial reasons for the decision. On the bright side we might add that Stratasys (NASDAQ:SSYS) spun off its “Bold Machines” unit earlier this spring and that the unit will now act as a standalone company striving to get a share of the 3D printing market. Michael Pollack’s Destrier Capital holds 301,000 shares of Stratasys with a value of $15.89 million.
Loosely continuing on the family theme is the increase of 136% JAT Capital made in family-controlled Sinclair Broadcast Group Inc (NASDAQ:SBGI). After the increase, JAT Capital held 1.88 million shares with a value of $59.00 million. Sinclair Broadcast (NASDAQ:SBGI), with 162 stations in 79 markets, has returned 7.00% on the NASDAQ so far this year, but is down by 6.55% over the past year. Sinclair Broadcast surprised analysts with its earnings for the first quarter, posting $0.25 which was $0.13 above expectations, while revenues were also slightly better than expected. Having a good feeling about Sinclair Broadcast (NASDAQ:SBGI) is hedge fund manager Glenn J. Krevlin, representing Glenhill Advisors, which increased its stake in Sinclair Broadcast by 5% during the first quarter to 2.60 million shares with a value of $81.48 million. Sinclair Broadcast celebrated 20 years as a publicly-traded company on the NASDAQ on June 5.
In real estate database company Zillow Group (NASDAQ:Z), Thaler opened a stake of 432,019 shares with a value of $43.33 million during the first quarter. Zillow, founded in 2005, has been having some ups-and-downs during the spring, and has lost 14.28% so far year-to-date and 32.47% over the last year. The stock has been battered by lower-than-expected revenue for the first quarter, although earnings managed to beat analysts’ expectations. Analysts are also pessimistic regarding the company’s future traffic, suggesting that Zillow (NASDAQ:Z) has to increase its efforts in marketing, advertising, or possibly launch new products. Nonetheless, a major investor in Zillow (NASDAQ:Z) is Tiger Global Management, led by Chase Coleman, owning a stake of 3.58 millon shares with a value of $359.34 million.
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