Air Transport Services Group Inc. (ATSG), Nature’s Sunshine Prod. (NATR), and Other Small-Caps Comprise Prescott Group’s Top Q2 Picks

A few days ago, Phil Frohlich’s Prescott Group Capital Management filed its 13F for the second quarter of 2014. In this document, the hedge fund disclosed most of its long equity positions as of June 30: 30 new positions, 45 additional purchases and 23 positions closed. Services (29%) and technology (24.5%) stocks accounted for more than half its portfolio –which is worth more than half a billion dollars. Let’s take a closer look at its top picks in order to elucidate if any of them deserve further research and could be considered as potential investments.

Air Transport Services Group Inc. (NASDAQ:ATSG)

The fund’s largest bet has been placed in the same company, Air Transport Services Group Inc. (NASDAQ:ATSG), since the first quarter of 2013. Its position in this small-cap airline operations, aircraft leases, aircraft maintenance and other support services provider has remained unchanged over Q2. Prescott Group owns 5.88 million shares of Air Transport Services Group Inc. (NASDAQ:ATSG), worth almost $50 million. This position accounts for 8.6% of its total equity portfolio.

Other major hedge funds betting on Air Transport Services Group Inc. (NASDAQ:ATSG) are Willem Mesdag’s Red Mountain Capital, which owns 11.15 million shares, and Gregg J. Powers’ Private Capital Management, with 1.98 million shares.

Second in line is Nature’s Sunshine Prod. (NASDAQ:NATR), another small-cap company in which the fund holds 1.86 million shares, worth around $31 million -5.5% of the fund’s total equity portfolio. Nature’s Sunshine Prod. (NASDAQ:NATR) is engaged in the manufacturing and selling of nutritional and personal care products.

Same as in the previous case, Willem Mesdag’s Red Mountain Capital is the largest hedge fund shareholder of record in Nature’s Sunshine Prod. (NASDAQ:NATR), with 2.43 million shares.

The third spot in this list has changed hands after Prescott Group almost tripled its stake in Servicesource International Inc (NASDAQ:SREV), a $373 million market cap company engaged in recurring revenue management with technology and technology-enabled companies to optimize maintenance, support and subscription revenue streams, while also improving customer relationships and loyalty. The fund now owns more than 3 million shares of Servicesource International Inc (NASDAQ:SREV), valued at more than $17.4 million.

As we have reported recently, Rishi Bajaj, Toby Symonds and Steve Tesoriere, the managers of Altai Capital, also seem to feel bullish about Servicesource International Inc (NASDAQ:SREV). A few weeks ago, the fund disclosed new position in the stock, with 8.22 million shares, which account for 9.9% of the company’s shares outstanding. Chuck Royce seems to see value in this company as well, since his fund boosted its wage by 9% to 1.17 million shares, over its last reported quarter (Q1 2014).
BioScrip Inc (NASDAQ:BIOS) escalated one position in this list –in relation to the previous quarter- even though the fund trimmed its exposure by 14%. Prescott Group now owns 2.09 million shares of BioScrip Inc (NASDAQ:BIOS), worth $17.4 million.

Opposite is the case of Mario Gabelli’s GAMCO Investors, which disclosed, in early June, that it had quintupled its stake in BioScrip Inc (NASDAQ:BIOS), to 4.43 million shares.

Finally, there’s Bluephoenix Solutions Ltd (NASDAQ:BPHX), a $45 million market cap company that develops and markets enterprise legacy migration solutions and provides tools and professional services to international markets. The fund declared no changes in its 3.22 million shares position, which is now worth more than $13.4 million.

The only other major hedge fund that we know is betting on Bluephoenix Solutions Ltd. (NASDAQ:BPHX) is Jim Simons’ Renaissance Technologies, which last disclosed ownership of 14,500 shares.

Disclosure: Javier Hasse holds no position in any stocks or funds mentioned

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