Our equity market studies have shown that the most popular small-cap picks ($1 billion – $5 billion market cap) amongst hedge funds have historically outperformed the wider market by 18 percentage points. Therefore, analyzing fund holdings can provide us with great investment ideas. In this article we will take a look at Dan Loeb’s Third Point’s top small-cap picks, in order to elucidate if they stand as attractive investment options.
First off is Sothebys (NYSE:BID), a $2.9 billion market cap auctioneer of authenticated fine art, antiques and decorative art, jewelry and collectibles. Third Point last declared having upped its stake by 5% to 6.65 million shares, worth approximately $289 million. This accounts for more than 4% of its total equity portfolio, and makes Third Point the third largest hedge fund shareholder at the company –amongst those we keep track of.
As we have reported earlier, Third Point’s position at Sothebys (NYSE:BID) has an activist nature. In March, the fund nominated three directors to be elected at the company’s shareholders meeting. Richard Mcguire’s Marcato Capital Management also holds Sothebys (NYSE:BID)’s stock, and last declared ownership of 4.56 million shares, worth $198 million.
Intrexon Corp (NYSE:XON) is a $2.5 billion market cap synthetic biology company in which Mr. Loeb holds a $78 million stake. After boosting its exposure by 18% over Q1, Third Point owns 3 million shares of Intrexon Corp (NYSE:XON), which account for approximately 1.15% of its total equity portfolio. Trailing the fund, and not as bullish, is David Einhorn’s Greenlight Capital, which last trimmed its stake in Intrexon Corp (NYSE:XON) by 38%, to 1.379 million shares.
Third in this list is a newcomer in Mr. Loeb’s equity portfolio: Ocwen Financial Corporation (NYSE:OCN), a $4.98 billion market cap financial services holding company. Third Point started a position, with 1 million shares, worth more than $39 million, in Ocwen Financial Corporation (NYSE:OCN) over Q1. Much larger is Peter Adam Hochfelder’s Brahman Capital’s stake; its 5.979 million shares, worth over $234 million, account for 7.5% of its total equity portfolio’s value. Another fund that recently bought into Ocwen Financial Corporation (NYSE:OCN) is Christian Leone’s Luxor Capital Group, which acquired 2.897 million shares over the first quarter.
The two remaining companies in this list have market capitalizations slightly above $5 billion but are still worth mentioning. NCR Corporation (NYSE:NCR) is a $5.88 billion market cap IT services company that saw Third Point start a position over Q1. The fund acquired 1.5 million shares of NCR Corporation (NYSE:NCR), worth about $54 million by the end of the first quarter.
The largest hedge fund shareholder at NCR Corporation (NYSE:NCR) is Richard Mcguire’s Marcato Capital Management, which last declared having upped its stake by 27%, to 10.3 million shares, worth more than $376 million.
Finally, there’s Crown Holdings, Inc. (NYSE:CCK), a $6.9 billion market cap designer, manufacturer and marketer of packaging products for consumer goods. Third Point did not disclose any moves in Crown Holdings, Inc. (NYSE:CCK) for Q1. However, its 3 million shares make it the second largest hedge fund shareholder at the company. Its stake, worth more than $134 million, accounts for almost 2% of is total equity portfolio.
The only fund -of record- with a larger stake in Crown Holdings, Inc. (NYSE:CCK) is Lou Simpson’s Sq Advisors, which owns 3.555 million shares of the company.
Disclosure: Javier Hasse holds no position in any stocks mentioned.