Polycom Inc (PLCM), Youku Tudou Inc (ADR) (YOKU) Among Hedge Fund Manager Lee Ainslie’s Small Cap Picks

We track 13F filings from hedge funds and other notable investors as part of our work researching investment strategies. One of our findings is that the most popular small cap stocks (which we define as a valuation between $1 billion and $5 billion) among hedge funds earn an average excess return of 18 percentage points per year (learn more about our small cap strategy), and we think that this is because small cap stocks receive less attention from institutional investors and the financial media and so are more likely to be mispriced. We can also screen individual filings for stocks in this range of market cap and treat them as a list of free recommendations which can be researched further if they also look like good values. Here are five small cap stocks that Tiger Cub Lee Ainslie’s Maverick Capital had in its portfolio at the end of December (or see the full list of stocks from the fund’s 13F):

Maverick reported a position of 7.4 million shares in Skyworks Solutions Inc (NASDAQ:SWKS), though this was down 28% from what it had owned at the end of September. Skyworks Solutions Inc (NASDAQ:SWKS) is a $4 billion producer of semiconductors. In the fiscal quarter ending in December, the first quarter of the company’s fiscal year, Skyworks experienced double-digit growth rates in revenue and earnings compared to the same period  in the previous fiscal year; the trailing earnings multiple is 19. Billionaire Ken Griffin’s Citadel Investment Group was also selling, but owned 1.7 million shares (find Griffin’s favorite stocks).

Ainslie and his team disclosed ownership of 2.5 million shares of Liquidity Services, Inc. (NASDAQ:LQDT), a company which operates online auctions for capital goods, equipment, and other assets. The stock trades at 23 times trailing earnings, with analyst expectations of growth over the next several years resulting in a five-year PEG ratio of 0.7. 30% of the float is held short, however, as a number of market players are bearish. Net income did decline in the company’s most recent quarter versus a year earlier, though revenue was up 15%. We think it’s notable that, statistically, Liquidity Services’ beta is 0.7.