We track quarterly 13F filings from hedge funds, and use the included information to help develop investment strategies; we have found, for example, that the most popular small cap stocks among hedge funds outperform the S&P 500 by 18 percentage points per year on average (learn more about our small cap strategy). We think that this is because small cap stocks (which we define as those with market capitalizations between $1 billion and $5 billion) are less widely owned by large institutional investors, resulting in them being more likely to be mispriced. Our database of 13F filings can also be used to identify top small cap picks from individual hedge fund managers, with investors then doing further research on particular names which seem interesting. Here are five small cap stocks which Cliff Asness’s AQR Capital Management owned at the end of December (or see the full list of stocks AQR reported owning):
The fund moved heavily into Hudson City Bancorp, Inc. (NASDAQ:HCBK) and closed the fourth quarter of 2012 with over 13 million shares in its portfolio. The bank, which is based in the New York metro area, is trading at a small discount to the book value of its equity; however, Hudson City Bancorp, Inc. (NASDAQ:HCBK) has not done particularly well at monetizing its assets and so its earnings multiples are in the 17-20 range. The stock does pay a dividend yield of nearly 4% going by current prices and recent dividend policy. Harvard Management was also buying the stock, as the endowment had 4.7 million shares according to its own 13F.
Asness reported a position of 4.3 million shares in Gamestop Corp. (NYSE:GME), the $3.8 billion market cap electronic game and accessories retailer. 50% of Gamestop Corp. (NYSE:GME)’s float is held short as investors are very skeptical that the company can survive in an era of digital distribution, though sales were off only slightly in its most recent fiscal quarter versus a year earlier and earnings were actually up. The dividend yield here is 3.7%. While value investor Joel Greenblatt cut his stake during Q4, Gamestop Corp. (NYSE:GME) was still one of the five largest holdings by market value in his portfolio (find Greenblatt’s favorite stocks).