Victor Viner’s V2 Capital has filed its 13F with the Securities and Exchange Commission for the end-of-first quarter reporting period. CIO Viner co-founded V2 Capital in 2004 along with co-portfolio manager Brett Novosel and CFO and CCO Michael Holleb, and the trio combined boast over 60 years of experience in the business and financial world, including Viner’s 25+ years of experience, which included founding and running Volaris Advisors, a multibillion dollar asset management firm that was eventually acquired by Credit Suisse Group.
The Chicago-based fund has a tightly balanced equity portfolio consisting of 44 positions with nearly identical weight, as well as four smaller positions. Given the lack of any clear-cut top picks in the fund’s portfolio, we’ve decided to instead focus on the top technology picks of the fund, which was the most popular sector in its diversified portfolio along with healthcare.
Let’s start with the fund’s new position in Apple Inc. (NASDAQ:AAPL), one of the most profitable businesses ever. That position had a value of $5.37 million as of the reporting period, and consisted of 43,167 shares. Despite huge earnings expectations for the first quarter, Apple Inc. (NASDAQ:AAPL) beat them handily, posting earnings per share of $2.33 and revenue of $58 billion. Analysts had bold expectations of $2.21 in earnings per share and $56.85 billion in revenue. Yet, the huge results and a pumped up $140 billion share buyback program have done nothing to help shares; in fact they’re down by 5% since the earnings report. One small disappointment for investors during the report was the somewhat surprising announcement from CEO Tim Cook that the margins on the Apple Watch would be lower than Apple Inc. (NASDAQ:AAPL)’s average margins (which were 40.8% during the first quarter), with analysts expecting them to be higher. Regardless, Apple has many bullish investors who expect the stock has as much as 50% upside still in it. Among them is billionaire Carl Icahn, who feverishly pitched for those greater shareholder returns.
V2 Capital’s position in QUALCOMM, Inc. (NASDAQ:QCOM) amounted to 79,785 shares valued at $5.53 million, making it the top pick in the fund’s portfolio. QUALCOMM, Inc. (NASDAQ:QCOM) is down by 8% year-to-date and came under the activist glare of renowned investor Barry Rosenstein of JANA Partners, who revealed a large position in April and plans to discuss ways to increase shareholder value, including spinning off what it deems to be a worthless chip business. The market reacted somewhat tepidly to JANA’s activist involvement however despite the company’s mundane performance and exorbitant executive compensation. In addition to Rosenstein, billionaire Ken Fisher is another investor with a large position in QUALCOMM, Inc. (NASDAQ:QCOM).
V2 Capital owns 76,180 shares of TE Connectivity Ltd (NYSE:TEL), with a value of $5.46 million. The position was also a new one, and in fact the largest new position V2 opened (though again, most of its positions are very close in value). TE Connectivity Ltd (NYSE:TEL) has seen a large volume of insider sales during 2015 as shares appreciated by more than 13%, culminating with the sale of 53,359 shares by Chairman and CEO Thomas Lynch on April 9. Shares have fallen about 4% in the second quarter though after a fairly wide earnings miss of more than 8%, though earnings were up by 6% year-over-year at $0.91. TE Connectivity Ltd (NYSE:TEL) had a very bullish new investor during the fourth quarter of 2014 in Ned Sedaka’s Para Advisors, which had 9% exposure to the stock in its small portfolio, making it the fund’s top long position.
Microchip Technology Inc. (NASDAQ:MCHP) is another of V2 Capital’s tech picks, with the fund owning 110,918 worth $5.42 million. Microchip Technology Inc. (NASDAQ:MCHP) releases it first quarter results after the closing bell later today and will be looking to build momentum off its last earnings report, which beat estimates and year-ago earnings at $0.60. The semiconductor industry is a challenging one for several reasons, which include shrinking margins, high production costs, and fierce competition, and that is reflected in Microchip’s 52-week performance, which stands at just 1%. Billionaire Ken Griffin is a firm believer in Microchip Technology Inc. (NASDAQ:MCHP) nonetheless, more than tripling his position during the fourth quarter to more than 1.81 million shares.
We track the 13F filings of funds like V2 Capital to determine the top 15 small-cap stocks held collectively by them. We gather and share this information based on 16 years of research, with backtests for the period between 1999 and 2012 and forward testing for the last 2.5 years. The results of our analysis show 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 outperforming the market in 13 of the 16 years of testing. Since the beginning of forward testing in August 2012, the strategy has worked flawlessly, outperforming the market every year and returning 137.7% through April 14, which is more than 80 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).