Billionaire Noam Gottesman’s Favorite Small-Caps Are Nimble Storage Inc (NMBL), Hudson City Bancorp, Inc. (HCBK)

Hedge fund GLG Partners, founded by billionaire Noam Gottesman and based in London, was founded in 1995 as a division of Lehman Brothers and later became independent in 2000. In 2010 it was acquired by Man Group for $1.6 billion, creating the largest listed hedge fund group at that time. The fund, currently run by Teun Johnston and Mark Jones has a public equity portfolio valued at $2.9 billion as of March 31. Among those are several small-cap stocks including Shanda Games Limited (NASDAQ:GAME), Hudson City Bancorp, Inc. (NASDAQ:HCBK), Riverbed Technology, Inc. (NASDAQ:RVBD), and Nimble Storage Inc (NYSE:NMBL), which we’ll look at in this article.

Riverbed Technology, Inc. (NASDAQ:RVBD)

Let’s first take a step back and analyze how tracking hedge funds can help an everyday investor. Through our research we discovered that a portfolio of the 15 most popular small-cap picks of hedge funds beat the S&P 500 Total Return Index by nearly a percentage point per month on average between 1999 and 2012. On the other hand the most popular large-cap picks of hedge funds underperformed the same index by seven basis points per month during the same period. This is likely a surprise to many investors, who think of small-caps as risky, unpredictable stocks and put more faith in large-cap stocks. In forward tests since August 2012 these top small-cap stocks beat the market by an impressive 84 percentage points, returning over 144% (read the details here). Hence a retail investor needs to isolate himself from the herd and take advantage of the best growth opportunities in the market by concentrating on small-cap stocks.

Noam Gottesman
Noam Gottesman
GLG Partners

One of the top small-cap picks held by GLG Partners as of the reporting period of its latest 13F filing was in San Francisco-based information technology company Riverbed Technology, Inc. (NASDAQ:RVBD). Riverbed Technology, founded in 2002 and listed since 2006, is a provider of solutions for end-to-end applications, visibility and control in IT Environments. GLG Partners increased its stake in Riverbed by 1,011% to 1.44 million shares valued at $30.17 million during the first quarter, after it was announced in late December that the company would be acquired by Thoma Bravo for $3.5 billion. On April 24, the deal was completed and Riverbed Technology, Inc. (NASDAQ:RVBD) taken private. Merger arb funds like Jonathan Lourie and Stuart Fiertz‘s Cheyne Capital made big moves into Riverbed following the acquisition announcement and were rewarded with 3% gains in 2015 before the stock was delisted.

A small-cap pick that is still being traded, at least for now, is Shanda Games Limited (NASDAQ:GAME), in which GLG Partners decreased its stake by 6% to 6.62 million shares with a value of $42.37 million. The Chinese online games developer, founded in 1999, has enjoyed strong returns of 22% year-to-date, partially due to the disclosure at the beginning of April that Shanda Games Limited (NASDAQ:GAME), which localizes games for both the Chinese and international markets, will be taken private by Capitalhold Limited in a $1.9 billion deal. The sale is expected to close during the second half of 2015. A similar purchase of Shanda was attempted by a consortium of buyers in early 2014, though it eventually fell through after some of the private-equity firms backing the deal withdrew. GLG had by far the largest position in Shanda Games among the funds in our database as of March 31, with only a handful of others, including Ken Griffin, holding relatively insignificant positions.