We track 13F filings from hedge funds and other notable investors as part of our work researching investment strategies. One of our findings is that the most popular small cap stocks (which we define as a valuation between $1 billion and $5 billion) among hedge funds earn an average excess return of 18 percentage points per year (learn more about our small cap strategy), and we think that this is because small cap stocks receive less attention from institutional investors and the financial media and so are more likely to be mispriced. We can also screen individual filings for stocks in this range of market cap and treat them as a list of free recommendations which can be researched further if they also look like good values. Here are five small cap stocks that Tiger Cub Lee Ainslie’s Maverick Capital had in its portfolio at the end of December (or see the full list of stocks from the fund’s 13F):
Maverick reported a position of 7.4 million shares in Skyworks Solutions Inc (NASDAQ:SWKS), though this was down 28% from what it had owned at the end of September. Skyworks Solutions Inc (NASDAQ:SWKS) is a $4 billion producer of semiconductors. In the fiscal quarter ending in December, the first quarter of the company’s fiscal year, Skyworks experienced double-digit growth rates in revenue and earnings compared to the same period in the previous fiscal year; the trailing earnings multiple is 19. Billionaire Ken Griffin’s Citadel Investment Group was also selling, but owned 1.7 million shares (find Griffin’s favorite stocks).
Polycom Inc (NASDAQ:PLCM), a video, voice, and content conferencing solutions company, was another of Maverick’s small cap picks. Polycom Inc (NASDAQ:PLCM),’s stock price is down 24% in the last year, and both sales and net income have been down going by recent reports. The sell-side expects the company to recover, and in fact the forward P/E is only 13, but we would be wary considering the business’s recent performance. Omega Advisors, managed by billionaire Leon Cooperman, increased its holdings of Polycom Inc (NASDAQ:PLCM), by 46% between October and December to a total of 5.7 million shares (research more stocks Cooperman was buying).
The fund owned 3.8 million shares of Youku Tudou Inc (ADR) (NYSE:YOKU), the $2.7 billion market cap Chinese Internet video content company, as of the beginning of January. Investors have hit the brakes on many Chinese stocks in the last year due to macro concerns and accounting fraud at a few companies, and Youku Tudou Inc (ADR) (NYSE:YOKU)’s stock price is down 27%. The company has reported strong numbers, including a doubling of revenue in its most recent quarterly report compared to the fourth quarter of 2011. Bain Capital’s hedge fund Brookside Capital was another major shareholder in Youku Tudou Inc (ADR) (NYSE:YOKU) (check out Brookside’s stock picks).
Maverick initiated a position of 2.2 million shares in $2.1 billion market cap business software company Qlik Technologies Inc (NASDAQ:QLIK). The earnings multiples are quite high here- for example, the forward P/E is 43- though revenue numbers at least have been strong. With the company reporting lower net income in Q4 than a year ago, however, we’d be sure to investigate what is happening in terms of costs. SAC Capital Advisors was also buying Qlik Technologies Inc (NASDAQ:QLIK), and closed December with 1.5 million shares in its portfolio; that fund is managed by billionaire Steve Cohen. See more stocks Cohen likes.
Disclosure: I own no shares of any stocks mentioned in this article.
