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John Thaler

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JAT Capital is a global long/short equity hedge fund led by University of Chicago graduate John Thaler, which was founded in 2007. The Greenwich, Connecticut-based fund keeps a public equity portfolio of $3.72 billion distributed heavily in the Technology and Consumer Discretionary sectors, which account for over 90% of its public portfolio’s value. The fund proved to be extremely resilient during the financial crisis of 2008, losing 6.4% compared to the hedge fund average of 19%. The firm did however suffer major losses in 2012 and 2014 and last month, Thaler announced that he was going to return capital to investors and unwind his portfolio by the end of June. The reason as Thaler says is not the middling results lately, but rather that he wishes to spend more time together with his family. In any case, the firm will now focus on wealth management only of its own employees, transforming into a family office. Now then, let’s take a look at three small-caps that headed Thaler’s portfolio before it was (or will be) dismantled, namely Stratasys, Ltd. (NASDAQ:SSYS), Sinclair Broadcast Group Inc (NASDAQ:SBGI) and Zillow Group Inc (NASDAQ:Z).

Zillow Inc (NASDAQ:Z)

A reader might question our decision to focus on the small-cap category, considering that its mostly the larger counterparts of these companies that head the portfolios of most hedge funds. The reason for our focus is simple. Our research has shown that in the period between 1999 and 2012 the top small-cap picks of hedge funds outperformed the broader market by nearly one percentage point per month, whereas the top overall picks (mostly large-caps) underperformed by seven basis points per month during the same period. Why pay high fees to own a glut of low-performing stocks when you can invest on your own in hedge funds’ best stock picks? Since its launch in August 2012, Insider Monkey’s small-cap strategy has outperformed the S&P 500 every year, returning over 142% since then, nearly 2.5 times greater than the S&P 500′s returns (read the details here).

John Thaler
John Thaler
JAT Capital Management

In digital printing company Stratasys (NASDAQ:SSYS), Thaler had increased his stake by 1,071% to 1.16 million shares with a value of $61.18 million as of March 31. The Minnesota-based 3D printer has experienced a terrible spring on the NASDAQ, with shares diving by 55.5% year-to-date and 63.79% over the last year, being squashed by currency fluctuations, declining product sales, and difficulties in the market for consumer 3D printing. The company earlier this spring laid off 100 of its 500 staff, referring to financial reasons for the decision. On the bright side we might add that Stratasys (NASDAQ:SSYS) spun off its “Bold Machines” unit earlier this spring and that the unit will now act as a standalone company striving to get a share of the 3D printing market. Michael Pollack’s Destrier Capital holds 301,000 shares of Stratasys with a value of $15.89 million.

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