Apex Capital is a San Francisco-based long/short equity fund founded by Sanford J. Colen in 1995. The fund recently filed its 13F with the Securities and Exchange Commission (SEC) for the reporting period of June 30. According to the filing, the fund’s public equity portfolio at the end of the second quarter constituted 48 positions worth over $1.15 billion. Consumer discretionary, healthcare, and information technology were the fund’s top sectoral picks for the quarter, with stocks from these accounting for 30%, 27%, and 21% of the fund’s equity portfolio respectively. The filing revealed that during the April-June period Apex Capital initiated a position in ten stocks, increased its position in 17 stocks, reduced its stake in 21 stocks, and liquidated its entire holdings in 14 previously-held stocks. In this article we are going to analyze Apex Capital’s three biggest tech bets heading into the third quarter: Netflix, Inc. (NASDAQ:NFLX), MicroStrategy Incorporated (NASDAQ:MSTR), and Cornerstone OnDemand, Inc. (NASDAQ:CSOD).
At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 123.1% and beating the market by more than 65.5 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.
Netflix, Inc. (NASDAQ:NFLX) continued to remain Apex Capital’s top pick, even though the fund sold 441,700 shares of the company during the second quarter. This large share sale can mostly be attributed as profit booking, as shares of Netflix, Inc. (NASDAQ:NFLX) have had an unprecedented rise in 2015, up by 57.7% during the second quarter alone. As of June 30, Apex owned over 1.19 million shares of Netflix, Inc. (NASDAQ:NFLX) worth $111.9 million. It’s interesting to note that the fund’s stake in Netflix, Inc. (NASDAQ:NFLX) at the end of June was still worth more than its stake in the company at the end of March. The company again managed to surprise Wall Street by reporting much better than expected numbers for the second quarter on July 15. Revenue for the quarter was up by 22.7% year-over-year to $1.65 billion, while adjusted EPS of $0.06 came in above analysts’ expectation of $0.04. During the second quarter, Netflix, Inc. (NASDAQ:NFLX) added 3.3 million subscribers, bringing its total subscriber count to an all-time high of 65 million. Karthik Sarma‘s SRS Investment Management increased its position in the company by 400% during the first quarter. However, legendary activist investor Carl Icahn recently tweeted that he had sold his entire stake in Netflix, Inc. (NASDAQ:NFLX).