Activist Cannell Capital Loves Micro-Caps

Activist investor J. Carlo Cannell leads his fund Cannell Capital in a non-conventional way. Cannell established his fund in 1992 with just $600,000. Currently the firm has about $437 million worth of regulatory assets under management. Prior to establishing his own firm, Cannell worked at Dakin Securities, an investment bank in San Francisco. During the second quarter the market value of Cannell Capital’s public equity portfolio decreased from $319.86 million to $305.71 million. A hefty 32% of these holdings belonged to the technology sector. More interestingly, the top three equity positions of the fund as of June 30 all belonged to the micro-cap category, according to the fund’s recent 13F filing, a reflection of Cannell’s disregard towards the efficient market hypothesis, and his penchant for inefficient markets to seek large returns. We decided to take a closer look at the the firm’s top picks, which included GTT Communications Inc (NYSE:GTT), Intralinks Holdings Inc (NYSE:IL), and BioTelemetry, Inc. (NASDAQ:BEAT).

Carlo Cannell

We don’t just track the latest moves of hedge funds. We are, in fact, more interested in their 13F filings, which we use to determine the top 15 small-cap stocks held by the funds we track. We gather and share this information based on 16 years of research which showed that these 15 most popular small-cap picks have a great potential to outperform the market, beating the S&P 500 Total Return Index by nearly one percentage point per month in backtests, and easily beating the most popular large-cap picks of funds, which nonetheless get the majority of their collective capital. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic only the very best ideas of the best fund managers on your own? Since the beginning of forward testing in August 2012, the Insider Monkey small-cap strategy has outperformed the market every year, returning 118%, more than two times greater returns than the S&P 500 during the same period (see more details).

J. Carlo Cannell
J. Carlo Cannell
Cannell Capital

During the June quarter the fund reduced its holding in GTT Communications Inc (NYSE:GTT) by 14% to 1.75 million shares valued at $41.67 million. The firm’s top equity holding represents 13.63% of its portfolio and amasses 5.39% of the $859.84 million technology company’s outstanding shares. The reduction to its stake probably has more to do with profit taking rather than a glum outlook of the company, since GTT Communications Inc (NYSE:GTT)’s shares have accelerated by more than 86% year-to-date. In its financial results for the second quarter the provider of cloud networking services reported a net loss per share of $0.32, which came down to $0.07 after adjusting for severance costs and met Wall Street’s expectations. Julian Allen‘s Spitfire Capital is another large stockholder of GTT Communications Inc (NYSE:GTT) which also decreased its holding in the company during the second trimester, by 10% to 1.38 million shares valued at $32.98 million.