In this article we discuss the billionaire Steve Cohen’s top 5 small-cap stock picks. If you want to read our detailed analysis of Cohen’s history and hedge fund performance, go directly to Billionaire Steve Cohen’s Top 10 Small-Cap Stock Picks.
5. NMI Holdings, Inc. (NASDAQ: NMIH)
Number of Hedge Fund Holders: 22
NMI Holdings is a mortgage insurance company that offers private mortgages and high-quality customer service. The company is currently waiting for approval from Freddie Mac and Fannie Mae to start providing mortgage insurance at the national level. Howard Marks is the company’s largest hedge fund investor with more than 4.9 million shares. NMIH is also one of Steve Cohen’s top 10 small-cap stock picks.
- NMI has outperformed EPS estimates almost 9 out of 10 times in the last 2 years. It has also outperformed revenue projections 75% of the time.
- NMI Holdings’ EPS estimates were revised 7 times upward and downward 2 times in the last 3 months. Its revenue estimates had 2 upward revisions and 2 downward revisions.
With a $112.4 million stake in NMI Holdings, Oaktree Capital Management owns 4.96 million shares of the company as of the end of the fourth quarter of 2020. Our database shows that 22 hedge funds held stakes in NMIH as of the end of the fourth quarter, versus 19 funds in the third quarter.
4. Domtar Corporation (NYSE: UFS)
Number of Hedge Fund Holders: 25
It of the providers of fiber-based products such as packaging paper, specialty paper, fiber for cables, absorbent hygiene, and market pulp products. Domtar has 8,000 employees, and its products are sold in 50 countries. The wide market already contributes to a good profile for this company in Steve Cohen’s top 10 small-cap stock picks. Some of the company’s latest and notable developments include:
- The signing of an accelerated share repurchase agreement with JPMorgan Chase for Domtar’s shares worth $200 million.
- The agreement will facilitate the payment of $200 million for 4.43 million shares to be delivered initially.
- The company will determine the final number of shares to buy back through a daily volume-weighted average of its common stock at the time of the agreement’s valuation period.
- Domtar will fund the share repurchase activity through available cash. This includes the cash that it gained after selling its personal care division in March 2020.
The company is also getting the attention of the smart money, as 25 hedge funds tracked by Insider Monkey reported owning stakes in the company at the end of the fourth quarter, up from 24 funds a quarter earlier.
3. Virtus Investment Partners, Inc. (NASDAQ: VRTS)
Number of Hedge Fund Holders: 20
The company consists of a group of managers focused on delivering long-term success for institutional and individual investors through the provision of investment management products and services. Virtus has various investment strategies deployed in different segments to match investor needs. Some of the latest developments in the company include:
- Under its management, the portfolio of properties as of February 28, 2021, was worth $166.6 billion, a notable improvement from $132.9 billion in the previous month. Virtus also offered its services to other free-earning assets worth $3.4 billion that were not part of the assets under its management.
- AUM had open-end funds worth $72.6 billion in February compared to $51.2 billion in January.
- Institutional accounts for AUM amounted to $42.2 billion in February compared to $40.8 billion in the previous month. Retail separate accounts AUM gained by 17% to $35.4 billion.
As of the end of the fourth quarter, there were 20 hedge funds in Insider Monkey’s database that held stakes in VRTS, compared to 14 funds in the third quarter. Schonfeld Strategic Advisors, with 137,361 shares of VRTS, is the biggest stakeholder in the company.
2. BioCryst Pharmaceuticals, Inc. (NASDAQ: BCRX)
Number of Hedge Fund Holders: 26
The company develops treatments for inflammatory and contagious illnesses with key focus areas, including biochemistry, computer modeling, and biology. BioCryst also makes small-molecule treatments tested for hereditary angioedema, seasonal influenza, and uncomplicated influenza.
One of its latest milestones of the company is ORLADEYO’s approval as a treatment for hereditary angioedema in Japan. Torii Pharmaceutical Co. will be the BioCryst partner responsible for the commercialization and distribution of ORLADEYO in the Asian country. The company also announced that its prophylactic once-daily ORLADEY received the FDA’s approval for preventing hereditary angioedema attacks in pediatric patients above 12 years old.
Despite losing $46 million in Q3 2020, BCRX had healthy cash and cash equivalent profile at $148.5 million. It also received $325 million in funding from Athyrium Capital Management and Royalty Pharma plc (NASDAQ: RPRX). BioCryst’s commercialization of ORLADEYO in Japan is expected to deliver more value for investors, thus no surprise that it is on the list of Cohen’s favorite small-cap stocks.
A total of 26 hedge funds tracked by Insider Monkey were bullish BCRX at the end of the fourth quarter, up from 22 funds a quarter earlier.
1. Axsome Therapeutics, Inc. (NASDAQ: AXSM)
Number of Hedge Fund Holders: 22
This biopharmaceutical company makes novel therapies for treating and managing central nervous system (CNS) disorders, especially those with limited treatment options. Its current treatment pipeline earns it a spot in Point72 Asset Management’s top 10 small-cap stock picks. For the last quarter the company reported:
- R&D expenses reduced to $17.4 million courtesy of completing AXS-07 and AXS-05’s phase 3 safety and efficacy trials.
- Cash and cash equivalents in Q4 2020 dropped to $183.88 million from $220 million
- General and administrative expenses grew to $10.4 million courtesy of the expanded commercial operations and higher personnel costs linked to stock compensation.
- Axsome filed an NDA with the FDA for the use of AXS-05 as a treatment for major depressive disorder. It also plans to submit an NDA for AXS-07 as a potential treatment for acute migraines as soon as Q2.
- AXS-12 earned Orphan Drug Designation from the FDA for treating narcolepsy patients. The same pipeline drug also received Breakthrough Therapy Destination for treating cataplexy in patients that suffer from narcolepsy.
- Axsome expects a YoY increase in operating expenses in 2021 as it continues to build out its commercial function and expand its pipeline. The $225 million term loan that the company secured is enough to fund its planned operations well into 2024.
Iridian Asset Management is one of the 22 hedge funds tracked by Insider Monkey having stakes in AXSM at the end of the fourth quarter. The fund owns over 2.06 million shares of the company.
You can also take a peek at 10 Best New Stocks to Buy in 2021 According to Billionaire Paul Singer and 10 Best Stocks to Buy According to Billionaire Mason Hawkins.
