Sanford J. Colen’s Apex Capital, a San Francisco-based long/short equity hedge fund that focuses on U.S.-traded stocks, has filed its 13F with the SEC for the current reporting period. Apex Capital’s three portfolio managers employ a non-consensus strategy to invest in best-of-breed companies with asymmetric risk-reward opportunities. The fund, founded in 1995, invests primarily in the consumer, technology, media and telecommunications (TMT), and healthcare sectors. At the end of the second quarter of 2015, Apex had 30% of the value of its public equity portfolio invested in consumer discretionary stocks, 27% in healthcare, 21% in information technology, and 14% in industrials. The market value of the fund’s portfolio stood at $1.15 billion at the end of June, representing a decrease of $237.41 million. In this article we’ll take a look at the top picks of the fund heading into the third quarter, which are Netflix, Inc (NASDAQ:NFLX), Michael Kors Holdings Ltd (NYSE:KORS), and Yelp Inc (NYSE:YELP).
It is well-known that hedge funds have under-performed the S&P 500 based on net returns over the past several years. But we are missing something very important here. Hedge funds generally pull in strong returns from their top small-cap stocks and invest a lot of their resources into analyzing these stocks. They simply don’t take large enough positions in them relative to their portfolios to generate strong overall returns because their large-cap picks underperform the market. We share the top 15 small-cap stocks favored by the best hedge fund managers every quarter and this strategy has managed to outperform the S&P 500 every year since it was launched in August 2012, returning over 118% and beating the market by more than 60 percentage points (read the details). Because of this, we know that collective hedge fund sentiment is extremely telling and valuable.
It’s position in Netflix, Inc. (NASDAQ:NFLX) stands at the apex of Apex Capital’s portfolio for the fourth consecutive quarter, and by a wide margin, despite the fund selling off 27% of its holding during the second quarter. That left the fund with 1.19 million shares valued at $111.91 million. Netflix, Inc. (Netflix) is the world’s leading Internet television network provider , incorporated in 1997. The US-based Company has over 65 million streaming members in over 50 countries. With a market cap of $45.16 billion, the company has three operating segments: Domestic streaming, International Streaming and Domestic DVD. CEO Reed Hastings aims to have the streaming video service in 200 countries by 2017 and has decided to invest more money into marketing the service outside of the U.S in the current quarter. Netflix shares are on a torrid run, with equity gains of 58% during the second quarter and over 152% year-to-date. Chase Coleman‘s Tiger Global Management holds just under 18.0 million shares of Netflix, Inc. (NASDAQ:NFLX) as of June 30, with 16.91 million of them being bought during the second quarter. That second quarter investment has made Coleman over $540 million so far in the third quarter, assuming none of it has yet been sold off.
Apex Capital added a new position to its portfolio in the form of Yelp Inc (NYSE:YELP) during the first quarter. In the second quarter, the fund increased its holding by another 27% to 1.36 million shares with a value of $58.36 million. This formed 5.06% of the fund’s total portfolio holdings and vaulted Yelp into the second spot in the fund’s portfolio. The company connects people with great local businesses by bringing “word of mouth” online and providing a platform for businesses and consumers to engage and transact. Yelp’s platform is transforming the way people discover local businesses; every day, millions of consumers visit its website or use its mobile app to find local businesses to meet their everyday needs. Recently, the $2.52 billion market cap company reported its second quarter financial results, with its earning missing the consensus estimate by 22.5%. It earned $0.12 per share during the quarter, compared to the consensus earnings estimate of $0.16. The news sent the share price down by 0.65% to $33.51. However, CEO Jeremy Stoppelman highlighted the growth in net revenues of 51% year-over-year and his plans to further spur the growth via international expansion of the company. Ken Fisher‘s Fisher Asset Management holds a position in Yelp Inc (NYSE:YELP) of 106,900 shares as of June 30, a new one for the firm.
Apex Capital held 1.27 million shares of Michael Kors Holdings Ltd (NYSE:KORS) as of June 30, with a value of $53.61 million, the holding having been increased by 26% in the second trimester. This formed 4.65% of the fund’s total portfolio holdings and kept the stock in the third position in Apex Capital’s portfolio. The global luxury lifestyle brand company operates its business in three segments, namely Retail, Wholesale, and Licensing. It has a global distribution network of company-operated retail stores, department stores, specialty stores, and select licensing partners. In its fiscal fourth quarter financial report for the period ending March 28, Michael Kors failed to meet investor expectations on the earnings front. This was primarily due to a decrease in comparable-store sales by a substantial 5.8%. However, earnings were up by 33.19% over the last year due to the company’s expanding network of stores. The company has a price-to-earnings ratio of 9.91 versus the Consumer Goods sector’s average of 14.02. According to analysts, the shares of Michael Kors are now undervalued, courtesy of the drubbing they have received on the market in 2015, down by 47.51%. Ricky Sandler‘s Eminence Capital holds one of the largest shareholder positions in Michael Kors Holdings Ltd (NYSE:KORS), owning 4.54 million shares as of June 30 after obtaining 3.20 million shares during the second quarter.