Jacob Gottlieb’s Visium Asset Management, Richard Gerson and Navroz D. Udwadia’s Falcon Edge Capital, and Richard Barrera’s Roystone Capital Management have each disclosed their latest moves in filings with the Securities and Exchange Commission. Those moves involve Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA), Jumei International Holding Ltd (ADR) (NYSE:JMEI), and Summit Materials Inc (NYSE:SUM).
Even though we follow the day-to-day activity of over 700 hedge funds, we are, in fact, more interested in their 13F filings, which we use to determine the top 15 small-cap stocks held among them. We gather and share this information based on 16 years of research, beginning first with backtests for the period between 1999 and 2012, followed by forward testing over the last 2.5 years. The results of our analysis show that these 15 most popular small-cap picks have great potential to outperform the market, having beaten the S&P 500 Total Return Index by nearly one percentage point per month on average in backtests. Moreover, since the beginning of forward testing since August 2012, the strategy worked splendidly, outperforming the market every year and returning 137.7% over the last 2.5 years, which is more than 80 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).
Let’s begin with Gottlieb’s fund Visium, which is becoming more and more bullish on Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) with each passing quarter. The fund more than doubled its position in Momenta during the fourth quarter, to just over 780,000 shares and has more than tripled the size of that holding in 2014, with the latest filing revealing a position of 3.0 million shares equal to a 5.1% passive stake in the company.
After the stock’s 30% decline in 2014, the reduced barrier of entry was clearly attractive for Visium, which first opened the position during the third quarter. The investment has proven to be wise so far, with Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA)’s stock gaining 60% year-to-date and playing a small part in Visium’s solid first quarter net returns of 5%. The latest surge for Momenta occurred this month after the FDA approved its Glatopa, a drug biosimilar to Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA)’s Copaxone for the treatment of relapsing multiple sclerosis. Conan Laughlin’s North Tide Capital had both the largest position and greatest exposure to Momenta among the funds we track, while also holding a large position in Teva as of the end of 2014.
The next filing involves Gerson and Udwadia’s Falcon Edge Capital and Jumei International Holding Ltd (ADR) (NYSE:JMEI), in which the fund’s latest filing revealed a position of just over 5.0 million Class A ordinary shares of Jumei, a 5.9% passive stake in the Chinese online retailer. The position is a new one for Falcon Edge, and being valued at over $110 million, now ranks in the top ten of the fund’s portfolio based on its end-of-2014 positions.
Like Momenta, Jumei International Holding Ltd (ADR) (NYSE:JMEI) has had a massive 2015 thus far, also jumping by more than 60% year-to-date. In the case of Jumei, it has benefited from a positive overall environment for Chinese stocks, with many enjoying healthy gains during April. One of the contributing factors to those gains is the news that the Chinese government may merge some of its state-owned enterprises and institute other measures to ensure its targeted economic growth. Despite the gains Jumei is still down over 9% since its U.S IPO last May after shedding more than 40% of its value in 2014. Apex Capital held one of the only positions in Jumei heading into 2015 among the funds in our database, and a relatively small one at that, of just under 200,000 shares.
Lastly, we come to Barrera’s Roystone Capital Management and its filing regarding Summit Materials Inc (NYSE:SUM), in which it disclosed a new position of 1.65 million shares. This represents a 6.2% passive stake in the construction materials company, which launched its IPO in March. Roystone Capital is the first shareholder among the funds we track. Shares of Summit Materials are already up by more than 15% since its IPO.
Several analysts initiated coverage on Summit Materials Inc (NYSE:SUM) after it went public, including Deutsche Bank, which gave it a ‘Buy’ rating and $30.00 price target, while Goldman Sachs and Bank of America both set a ‘Neutral’ rating with price targets of $26.00 and $25.00 respectively.
Disclosure: None
