The Pro’s Favorite Small Caps (TNS, RCNI, SVNT, EXXI, MDVN, ITMN, YRCW)
Many Pro investors, thanks to the large sums of money they invest, tend to favor big cap stocks. The benefits here are two-fold, as it’s much easier to move large sums of money in and out of big-cap stocks, and they are generally safer than the little guys. But it’s also true that the Pros do dabble in small caps, and with this class of investment typically being on the riskier end of the spectrum, some investors find it useful to know just which small caps have the Pro “stamp of approval.”
With that in mind, we can use tickerspy’s Ideas & Research section to see which small caps (market caps of under $1 billion) were most popular with the Pros at the end of Q1.
Setting aside the various ETFs that appear near the top of the list, there are a number of intriguing names. Data communications firm TNS (TNS) is seeing interest from the Pros of late. The stock has pulled beck since issuing weaker-than-expected guidance in an earnings report in early May. TNS’s networking and data services are used by banks, retailers, and payment processors. One of TNS’s top owners at the end of Q1 was hedge fund Trefalet, which was making a number of moves in small caps during the quarter.
Also high on the Pros’ small cap list is cable TV and broadband provider RCN (RCNI), which focuses primarily on the mid-Atlantic region. Last month, RCN shareholders approved a buyout by private equity firm ABRY Partners worth $15 a share. Finally, there’s biotech Savient Pharmaceuticals (SVNT), which has drugs in development to treat gout and other diseases, and Energy XXI (Bermuda) (EXXI), an oil and natural gas exploration and production company with onshore properties in Louisiana and Texas, and offshore in the Gulf of Mexico.
The above stocks are the small caps that were most likely to be among the top, U.S. listed holdings of the Pros at the end of Q1, but we can also look at which small caps were most added to or increased in Pro portfolios during the quarter. Again excluding ETFs and the companies noted above, the most added small cap during Q4 was Medivation (MDVN), a biotech with drugs in development to treat Alzheimer’s disease, Huntington disease, and prostate cancer. Also being added to Pro portfolios during the quarter were trucking company YRC Worldwide (YRCW) and biotech InterMune (ITMN), which plunged in early May when the FDA rejected its lung scarring drug candidate.
Pro portfolio performance is based on institutions’ top-15 holdings as disclosed in quarter-end filings with the SEC. Pro performance does not take into account additional holdings beyond the top 15 nor does it include positions that are not required to be disclosed by the SEC. As such, Pro portfolio performance should be considered an approximation and not a precise record of how an institution has performed over time.
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