Mark N. Diker‘s Diker Management in 13G filings with the SEC has disclosed several changes from its equity portfolio. First off is the fund’s stake in Crossroads Systems Inc (NASDAQ:CRDS), which was increased to 1.58 million shares representing 8.02% of the company’s outstanding common stock from 1.23 million shares held earlier. Next in line is Selectica Inc (NASDAQ:SLTC), whose stake was inched up to 794,497 shares, which represent 9.99% of the outstanding stock. Visualant, Incorporated (OTCMKTS:VSUL) has also gained the fund’s attention, as Diker disclosed a new position containing 10.5 million shares equal to 5.95% of the company. Lastly, Diker also raised its exposure to Cyren Ltd (NASDAQ:CYRN) to about 1.99 million shares, equal to 6.27% of the common stock from 1.63 million shares disclosed earlier.
Founded in 2002, Diker Management generally invests in companies with a market capitalization between $25 million and $750 million. However, an exception to the rule is the fund’s stake in Apple Inc. (NASDAQ:AAPL), which is its second largest holding as of the end of 2014. Most of the fund’s stakes are in the technology sector, which constitutes about 61% of the equity portfolio’s value. Total assets under management amount to around $700 million, while the market value of Diker’s equity portfolio stood at $512.59 million towards the end of the fourth quarter.
Diker’s stake in Apple Inc. (NASDAQ:AAPL) remained unchanged during the fourth quarter at about 643,300 shares valued at $71.0 million. According to an investor letter by David Einhorn of Greenlight Capital, Apple Inc. (NASDAQ:AAPL)’s stellar 30% revenue growth in the December quarter owing to sales of iPhone 6 is slowly going to subside as the contribution of its blockbuster product in the company’s top line continues to slim. His expectations from Apple Watch were merely modest. However, Einhorn still believes that the tech giant is still undervalued and deserves what he calls a ‘premium multiple’. Greenlight held some 8.61 million shares of Apple Inc. (NASDAQ:AAPL) valued at $949.88 million at the end of 2014.
Diker Management’s focus on small-cap stocks is somehow in line with our own strategy. Through our research, we discovered that a portfolio of 15 most popular small cap picks of hedge funds beat the S&P 500 Total Return Index by nearly a percentage point per month between 1999 and 2012. On the other hand, the most popular large cap picks of hedge funds underperformed the index by 7 basis points per month during the same period. In forward tests since August 2012 through March 2015 top small-cap stocks beat the market by a hefty 79.4 percentage points (read the details here). Hence a retail investor needs to isolate himself from the herd and take advantage of the prevalent arbitrage opportunities in the market by concentrating on small-caps.
