5 Stocks Added to Rail-Splitter Capital’s Portfolio in Q1

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John Croghan and Richard Fradin‘s Illinois-based Rail-Splitter Capital Management was founded as Splitter Capital Management in 2002. The fund held about $401.72 million worth of U.S equities in its portfolio at the end of March, with the technology sector representing 41% of the value of the portfolio, with healthcare amounting to another 18%. The turnover ratio, which signifies the activity in the portfolio, stood at just 33.33% during the first quarter, which is relatively low. Given that, we decided to take a look at some of the stocks that the fund did find intriguing enough to make a move on during the first quarter, namely the top five additions to Rail-Splitter’s portfolio during the period.

Our research determined that following the small-cap stocks, that hedge funds are collectively bullish on, can help a smaller investor beat the S&P 500 by around 95 basis points per month (see more details here).

#5 Infinera Corp. (NASDAQ:INFN)

 – Shares Owned by Rail-Splitter (as of March 31): 472,300

 – Value of Holding (as of March 31): $7.59 Million

The fund’s new stake in Infinera Corp. represented about 1.89% of its portfolio on March 31. Considering that Infinera Corp. (NASDAQ:INFN)’s stock plummeted by more than 26% in April, the move hasn’t worked out well for the fund as of yet. While the optical transport hardware vendor managed to marginally beat bottom-line estimates with its first quarter EPS, it narrowly missed the top-line mark. However, the real source of disappointment was in the company’s soft guidance for the second quarter amid industry-wide weakness. The company guided for second quarter revenue of $250 million-to-$260 million, well below the $272.2 million consensus estimate, while the $0.15-to-$0.19 in EPS that the company predicted for the ongoing quarter also fell short of the $0.22 that analysts were anticipating. Prescott Group Capital Management, led by Phil Frohlich, appears to have been wise to slash its Infinera Corp. (NASDAQ:INFN) holding by 27% during the first three months of the year, to about 76,600 shares valued at $1.23 million.

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#4 MarketAxess Holdings Inc. (NASDAQ:MKTX)

 – Shares Owned by Rail-Splitter (as of March 31): 75,600

 – Value of Holding (as of March 31): $9.43 Million

In contrast to Infinera, Rail-Splitter’s addition of MarketAxess Holdings Inc. (NASDAQ:MKTX) to its portfolio has worked out well so far, as shares of the New York-based electronic trading platform have surged by more than 10% on a year-to-date basis are trading just 5% below their 52-week high. MarketAxess Holdings Inc. (NASDAQ:MKTX) marginally missed the top and bottom-line estimates of analysts with its financial results for the first quarter. Revenue shot up by 15.4% on a year-over-year basis to $88.6 million on the back of record electronic bond-trading. The company also witnessed impressive volume growth in its emerging markets, U.S. high-yield, and Eurobond segments amounting to 36%, 45%, and 54%, respectively. Earnings per share also soared by 18.5% compared to the same quarter of last year, to $0.77. Jim Simons‘ renowned quant fund Renaissance Technologies was the largest stockholder of MarketAxess within our database on December 31, as it held more than 189,300 shares.

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We go over three more stocks that were added to Rail-Splitter’s portfolio in the first quarter on page two.

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