Prescott Group Capital Management, led by Phil Frohlich, reported a total of 164 positions in its latest 13F filed with the U.S. Securities and Exchange Commission for the reporting period of September 30. The value of the fund’s equity portfolio stood at $414.66 million. Founded by Phil Frohlich in 1992, Prescott Group has around $500 million in assets under management. The Oklahoma-based hedge fund focuses on small and mid-cap stocks. Prescott Group was very active during the third quarter, buying 12 new stocks, as well as increasing its stakes in over 25 companies. At the same time, the investor sold out of its stakes in over 25 companies. In this article, we will talk about Prescott Group’s top holdings, in terms of value.
Why do we pay attention to hedge funds’ moves? Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by more than 53 percentage points since the end of August 2012. These stocks returned a cumulative of 102% vs. a 48.7% gain for the S&P 500 Index (see the details here). That’s why we believe investors should pay attention to what hedge funds are buying.
5. Mattersight Corp (NASDAQ:MATR)
Shares held (as of September 30): 1,550,996
Total Value (as of September 30): $11.96 million
Percent of Portfolio (as of September 30): 2.88%
Prescott Group slightly upped its stake in Mattersight Corp (NASDAQ:MATR) to 1.55 million shares, valued at around $12 million. Mattersight Corp is engaged in personality-based software applications, using them to analyze and predict customer behavior based on the language exchanged during service and sales interactions. For the second quarter ended June 30, Mattersight reported revenue of $9.7 million, representing a 33% increase on a year-over-year basis. Net loss was $3.6 million, versus $3.3 million in the same quarter last year. This improvement in the company’s financial outlook seems to have had a good result on the stock, which has increased by 24.56% year-to-date. Another investor that has faith in Mattersight Corp (NASDAQ:MATR) is Mark N. Diker’s Diker Management, which holds 1.36 million shares of the company as of June 30.
4. Destination XL Group Inc (NASDAQ:DXLG)
Shares held (as of September 30): 2,141,029
Total Value (as of September 30): $12.44 million
Percent of Portfolio (as of September 30): 3.00%
Prescott Group’s position in Destination XL Group Inc (NASDAQ:DXLG) remained flat over the third quarter. The investor disclosed ownership of 2.14 million shares, valued at over $12 million. Destination XL Group is a specialty retailer of big and tall men’s apparel. The company expects to grow its DXL stores to about 230 locations by the end of 2017. For the second quarter of fiscal year 2015, the company narrowed its loss to $1.0 million, versus a loss of $4.0 million in the same period last year. Sales for the quarter rose by 9% to $114.1 million, compared to the previous year. Destination XL Group Inc’s stock is also showing improvement, gaining 20.58% during the last three months. Glenn J. Krevlin’s Glenhill Advisors also sees value in Destination XL Group Inc (NASDAQ:DXLG), owning 5.83 million shares.
On the next page, we will talk about Prescott Group’s top three stocks, starting with Servicesource International Inc (NASDAQ:SREV).