Sandler Capital’s Under-the-Radar Stock Picks and One Tech Pick to Rule Them All

In its latest 13F filed with the Securities and Exchange Commission, Andrew Sandler’s Sandler Capital Management disclosed the contents of its public equity portfolio, which was worth $860.89 million as of September 30, the latest 13F reporting period. Sandler Capital uses a long/short equity approach with a multi-sector focus. During the quarter, the fund opened new positions in 63 companies, while selling off its stakes in 99 stocks during the challenging quarter for the equities market. In this article, we’ll analyze the stocks Sandler Capital remained bullish towards through the quarter and ranked as its top five picks at the end of the period.

We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 102% since then and outperformed the S&P 500 Index by around 53 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.

#5 Medical Properties Trust Inc. (NYSE:MPW)

– Shares held (as of September 30): 1.07 million

– Total Value (as of September 30): $11.85 million

Sandler Capital reduced its position in Medical Properties Trust Inc. (NYSE:MPW) by 40,797 shares during the third quarter. Medical Properties Trust is a real estate investment trust (REIT) engaged in acquiring and developing net-leased healthcare facilities. The company reported a drop in its third-quarter income to $23.1 million compared to $28.5 million a year ago. Its quarterly revenue, however, increased to $114.6 million versus $80.8 million for the third quarter of 2014. Shares of Medical Properties Trust Inc. (NYSE:MPW) have struggled since April, and have declined by 18.65% year-to-date. Amy Minella’s Cardinal Capital held 3.46 million Medical Properties Trust Inc. (NYSE:MPW) shares as of the end of September.

#4 Equifax Inc. (NYSE:EFX)

– Shares held (as of September 30): 124,417

– Total Value (as of September 30): $12.09 million

Equifax Inc. (NYSE:EFX) is engaged in providing information solutions and human resources outsourcing services worldwide. Sandler Capital was bullish on the stock during the latest quarter, upping its stake in it by 136%. Equifax Inc. (NYSE:EFX)’s third-quarter income rose to $117.9 million compared to $92.7 million a year earlier. The company’s revenue was $667.4 million in the third quarter, representing a more modest year-over-year increase of 9%. Investors seem to be happy with the company nonetheless, as its shares have increased by 35.91% year-to-date. More hedge funds were taking an interest in Equifax Inc. (NYSE:EFX) during the third quarter as well. A total of 35 hedge funds tracked by Insider Monkey were holding a stake in Equifax Inc. (NYSE:EFX) at the end of September, up from 29 investors at the end of June. Cliff Asness’ AQR Capital Management owned 1.05 million shares of Equifax at the end of the third quarter.

We’ll dig into Sandler Capital’s top three stock picks on the next page.

#3 Home Depot Inc (NYSE:HD)

– Shares held (as of September 30): 144,696

– Total Value (as of September 30): $16.71 million

Sandler Capital increased its position in home improvement retailer Home Depot Inc (NYSE:HD) by 9,561 shares during the third quarter. Home Depot was profitable during the third quarter, posting a 6.4% year-over-year increase in sales to $21.8 billion. The company’s earnings grew to $1.7 billion compared to earnings of $1.5 billion in the same period of last year. Those strong results have contributed to the company’s stock having surged by 25.65% year-to-date. At the end of September, a total of 69 hedge funds tracked by Insider Monkey were long Home Depot Inc (NYSE:HD), up slightly from 67 investors at the end of June. Another investor betting big on Home Depot Inc (NYSE:HD) is Ken Fisher’s Fisher Asset Management, which held 8.38 million shares at the end of September.

#2 Live Nation Entertainment Inc. (NYSE:LYV)

– Shares held (as of September 30): 699,539

– Total Value (as of September 30): $16.82 million

Live Nation Entertainment Inc. (NYSE:LYV) is a live entertainment company in which Sandler Capital decreased its position by 83,768 shares during the third quarter. Live Nation reported solid financial results for the third quarter, with its operating income increasing to $153.5 million compared to $150.6 million a year earlier, while its revenue rose to $2.62 billion, up by $120 million year-over-year. Live Nation Entertainment lost a fair deal of hedge fund support during the third quarter however. A total of 28 funds tracked by Insider Monkey held the stock in their portfolios at the end of September, down from 36 investors long Live Nation at the end of June. Among those investors was Charles Akre’s Akre Capital Management, which owned 6.26 million shares at the end of September.

#1 Facebook Inc (NASDAQ:FB)

– Shares held (as of September 30): 419,944

– Total Value (as of September 30): $37.75 million

Sandler Capital’s top holding at the end of September was Facebook Inc (NASDAQ:FB), and despite the investor decreasing its position in the social networking giant by 38,146 shares during the quarter, it still had more than twice as much capital invested in the stock than in any other. That has certainly paid off well for the fund in the fourth quarter, as Facebook shares are up by over 16%. Facebook Inc (NASDAQ:FB) is a favorite stock among billionaires tracked by Insider Monkey, as a total of 18 billionaires held positions in Facebook at the end of September. Among other things, Facebook Inc (NASDAQ:FB) is now focusing on video ads and Facebook Instant Articles to boost its revenue. The company’s latest product, Facebook Instant Articles, enables newspaper publishers to post their articles directly to Facebook’s iOS app, which is likely to increase the company’s ad revenue. Among the hedge funds and other investors that we track, Stephen Mandel’s Lone Pine Capital is the largest stockholder of Facebook as of September 30, with ownership of more than 10.7 million shares.

Disclosure: None