Phil Frohlich‘s Prescott Group Capital Management has lifted the veil from its equity portfolio as of the end of March as it recently submitted its 13F filing to the SEC.
Phil Frohlich founded Prescott Group Capital Management in 1992 with an intention to focus on the small and mid-cap equities. As of April 2015, the fund had $662 million assets under management. The investment strategy relies more on a bottoms-up approach, where more emphasis is laid on the company’s fundamentals rather than the macroeconomic environment or market timing. In this regard the fund focuses on the prospective company’s revenue growth, return on equity and its management. The investment strategy is not restricted to hunting for just ‘growth’ or ‘value’ stocks, but could involve a combination of both.
The market value of Prescott’s equity portfolio stood at $497.88 million at the end of March, with Information Technology being the highest contributing sector at 23% of the portfolio value. The top picks of the fund included Air Transport Services Group Inc. (NASDAQ:ATSG), Nature’s Sunshine Prod. (NASDAQ:NATR), Regional Management Corp (NYSE:RM), Servicesource International Inc (NASDAQ:SREV), and PharmAthene, Inc. (NYSEMKT:PIP).
Aside from Prescott we have been following over 700 hedge funds at Insider Monkey for the last couple of years. We follow hedge funds because our research has shown that their stock picks historically managed to generate alpha even though the filings are 45 days delayed. We used a 60-day delay in our back tests to be on the safe side. Our research have shown that the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. After adjusting for risk, our calculations revealed that these stocks’ monthly alpha was 80 basis points. We have also been sharing and tracking the performance of these stocks since the end of August 2012. These stocks returned 132% over the last 2.5 years, outperforming the S&P 500 ETF by nearly 80 percentage points (see more details here).
With about 6.22 million shares valued at $57.33 million, Air Transport Services Group Inc. (NASDAQ:ATSG) was Prescott’s largest holding, representing 11.51% of the fund’s portfolio value. Air Transport Services Group is a provider of aviation solutions to the cargo transportation and package delivery businesses, whose stock has appreciated by 10.05% year to date. Air Transport Services Group Inc. (NASDAQ:ATSG) has benefitted from a consistent growth in air cargo since the second half of 2014, declining fuel prices, and its customers having a more confident outlook for the market. The most important recent highlight is perhaps the agreement with DHL, whereby Air Transport Services Group Inc. (NASDAQ:ATSG) will extend support to DHL’s North American air network through March 2019.