Ken Fisher’s Fisher Asset Management is one of the largest funds out of the universe of over 700 hedge funds that we track at Insider Monkey. Few may know it, but Ken Fisher started his fund back in 1979 with only $250. Since then, the fund’s assets under management have made a pretty good exponential jump, to $54 billion, and Fisher has become quite rich himself in the process, standing today as a billionaire worth some $2.8 billion. A good chunk of his fund’s success is tied to its long stock picks, as the public equity portfolio of his fund comprises around 93% of its assets under management. In this article we would like to take a closer look at a specific niche of those picks, the top small-cap picks of the fund, represented by PAREXEL International Corporation (NASDAQ:PRXL), Aspen Technology Inc (NASDAQ:AZPN), and Webster Financial Corporation (NYSE:WBS), to see how they have performed this year and what they are made of.
A reader might question our decision to focus on the small-cap category, considering that its mostly the larger counterparts of these companies that head the portfolios of most hedge funds, including FIsher’s. The reason for our focus is simple. Our research has shown that in the period between 1999 and 2012 the top small-cap picks of hedge funds outperformed the broader market by nearly one percentage point per month, whereas the top overall picks (mostly large-caps) underperformed by seven basis points per month during the same period. Why pay high fees to own a glut of low-performing stocks when you can invest on your own in hedge funds’ best stock picks? Since its launch in August 2012, Insider Monkey’s small-cap strategy has outperformed the S&P 500 every year, returning over 139% since then, nearly 2.5 times greater than the S&P 500′s returns (read the details here).
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The first stock on the list of Fisher’s top small-cap picks is PAREXEL International Corporation (NASDAQ:PRXL), in which Fisher Asset Management held 2.43 million shares valued at $156.39 million on June 30. PAREXEL International Corporation (NASDAQ:PRXL) is a $3.57 billion biopharmaceutical outsourcing services company providing a range of expertise in clinical research, logistics, medical communications, and pharmaceuticals consulting. This year the stock of the company has already gained 16.36%, which, while impressive, is only about par for the course for the red-hot biotech sector. Yet, the analysts’ mean estimates suggest a further 13.04% upside potential for PAREXEL, from $64.65 at which it currently trades. Gotham Asset Management, headed by Joel Greenblatt, sat in second place among the largest shareholders of PAREXEL’s stock covered by our database after the second quarter of the year, holding some 1.27 million shares worth $87.34 million.