Sanford J. Colen’s Apex Capital’s Top Picks Include Netflix, Inc. (NFLX) & eBay Inc (EBAY) Among Others

Over the past few days hedge funds have been filing their 13Fs for the fourth quarter of 2013, in which they disclose many of their long equity positions as of the end of December. We have found that the most popular small cap stocks among hedge funds outperformed the market by 18 percentage points even though we started measuring the returns a couple of weeks after 13Fs have been made public. It can also be productive to treat individual 13Fs as free recommendations from fund managers- not necessarily to be followed, but to be considered briefly and then researched further if they seem appealing.

In this article, I will briefly look into Sanford J. Colen’s Apex Capital’s equity portfolio. This hedge fund has been around for almost 20 years, and its long holdings are worth more than $1.5 billion, with a strong focus on services and, in a lesser measure, technology.

Although Apex’s most valuable assets are call options at Netflix, Inc. (NASDAQ:NFLX), Tesla Motors Inc (NASDAQ:TSLA) and Lululemon Athletica Inc. (NASDAQ:LULU), we will take look at the long positions. Leaving these options aside, the fund is most bullish about Netflix, Inc. (NASDAQ:NFLX), same in Q3. Even though its stakes in the internet television giant were slightly trimmed over Q4, its value increased (stock price rose by almost 10% since the start of 2014), and now adds up to more than $69.70 million. However, analysts all over are questioning the convenience of buying (or even holding) this stock, even in spite of the fact that Netflix, Inc. (NASDAQ:NFLX) is actually a good company, with above average growth prospects.

Netflix, Inc. (NASDAQ:NFLX)

Apex also reduced its participation in its second most valuable holding by the end of Q3: the large-cap, Hertz Global Holdings, Inc. (NYSE:HTZ). From 2.60 million shares, the holding plummeted to 1.70 million shares. However, this seems to have been a right call, at least for the short term, since the stock price fell more than 12% since Jan. 1st 2014.

Nonetheless, analysts do not seem to agree with Mr. Colen (neither do they agree with the market, it seems). Most analysts recommend buying this stock, and research firms expect it to outperform its peers. On the other hand, an above average valuation and razor thin margins might dissuade a fundamental investor.

Hertz Global Holdings, Inc. (NYSE:HTZ)’s second-runner place (in Q3) was occupied by MicroStrategy Incorporated (NASDAQ:MSTR), a provider of business intelligence and mobile software with a market cap of barely $1.4 billion. Apex increased its bets on this small-cap company over Q4 by more than 47%, and now owns 423,250 Class A New Shares of the firm. Boasting an above average net margin and industry leading returns on equity and assets, while trading at about 1/3 of the industry average valuation, one can certainly understand the reason behind this move. Moreover, analysts (in average) expect MicroStrategy Incorporated (NASDAQ:MSTR) to deliver average annual EPS growth rates around 25%, compared to an industry mean projection of 17%-18%.

MGM Resorts International (NYSE:MGM), which occupied the third place in Apex’s portfolio by the end of Q3 was also displaced. Now this position is taken by Actavis plc (NYSE:ACT), a $32 billion market cap specialty pharmaceutical company. This stock was added to the fund´s portfolio in Q4, and is Apex´s largest new buy of the quarter. Its 310,000 shares are valued at $57.3 million.

Finally, on the fifth place, is eBay Inc (NASDAQ:EBAY), the internet commerce behemoth. On one of the most bullish moves in the quarter, Apex doubled its participation in the company, from 400,000 to 800,000 shares.  Same as the case of MicroStrategy Incorporated (NASDAQ:MSTR), understanding why Mr. Colen is betting on eBay Inc (NASDAQ:EBAY) is not so hard. Trading at 24 times the company’s earnings, at a considerable discount to the 40.5 x P/E industry average, while boasting industry leading margins and a strong return on assets, this stock is certainly attractive for fundamental investors. Moreover, the analysts’ mean recommendation stands at a “buy” this week, and long-term growth projections surpass its industry’s average. The outlook for this company, which enjoys of great market penetration, a capital-efficient model and strong network effects, makes it a worthy investment for Mr. Colen. Is this the case for you too?

Disclosure: Javier Hasse holds no position in any stocks mentioned

Recommended Reading:

Michael Messner’s Seminole Capital Top Picks From the Latest 13F

Hedge Fund Highlights: Jeffrey Altman, Seth Klarman & Ken Griffin

Sanford J. Colen Sends Letter To Board of MicroStrategy (MSTR); Wants Investor Communication Program

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!