Two Small-Cap D.E. Shaw’s Picks with Insider Purchasing

Recent studies have shown that small-cap hedge fund picks tend to outperform the wider market by a small margin. If we add insider bullishness to this equation, chances of success become greater. Thus, let’s take a look at two of D E Shaw‘s small new positions (in which other investors such as, Ken Griffin and Jim Simons also hold stakes) that have also seen their insiders buy their stock lately.

David E. Shaw

Winmark Corporation (NASDAQ:WINA) is a $400 million market cap franchisor of four value-oriented retail store concepts that buy, sell, trade and consign merchandise. On March 21, John L. Morgan, Chairman, CEO and 10% owner of the company’s stock acquired 1,500 shares of Common Stock for $77.46 per share. He now owns more than 1.67 million shares, worth more than $130 million.

Mr. Morgan’s bet is quite comprehensible, given Winmark’s industry leading margins and returns, coupled with a below-average valuation.

 

Winmark

Source: Morningstar

In addition to this insider, Brian Bares‘ Bares Capital Management holds 833,650 shares of the company, which comprise more than 6% of its equity portfolio’s value. In turn, Jim Simons owns 92,000 shares, after recently increasing his stakes by 10%.

The other company that makes it to this list is Miller Energy Resources Inc (NYSE:MILL), a $243 million market cap oil and gas exploration and production company that utilizes seismic data and other technologies for geophysical exploration and development of wells. On April 17, Bob Gower, Board Director, acquired 10,000 shares of Common Stock for $5.25 per share. He now owns 75,000 shares of the company. In addition, Matthew Hulsizer holds 105,057 shares, after increasing his bets by 14% over the last reported quarter.  For his part, Cliff Asness just recently started a position in the stock with 83,841 shares. D.E. Shaw owns 22,868 shares of Miller Energy Resources, and 2,582 shares of Winmark Corporation.

Although the E&P company boasts negative margins and returns, the investments can be understood by looking at its growth projections. Analysts have estimated a mean price target of $8.81 per share, which implies an upside potential of approximately 64%. They expect Miller Energy to deliver EPS growth of 15.90% this year, and 106.90% next year.

Disclosure: Javier Hasse holds no position in any stocks mentioned

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