Exa Corp (EXA): This Fund Now Holds a Big Position

Featured tickers:  Exa Corp (NASDAQ:EXA), Facebook Inc (NASDAQ:FB)

Discovery Group is a hedge fund which specializes in investing in micro-capitalized stocks using fundamental valuation techniques. It was founded by Daniel J. Donoghue and Michael R Murphy in 2002, who are still the managing partners of the fund.

Recently the fund filed a 13G form with the SEC, disclosing a substantial holding in Exa Corp (NASDAQ:EXA). The fund now holds 703,383 shares of EXA, worth about $5.9 million. We will now take a quick look at Exa Corp (NASDAQ:EXA).

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A quick look

Exa Corp (NASDAQ:EXA) provides simulation software and related services for vehicle manufacturers. The Company’s primary product, PowerFLOW, aims to provide engineers and designers an alternative to physical prototyping. The Company is primarily focused on the ground transportation market, but is gradually attempting to expand to other industries including aerospace, oil and gas production, chemical processing, architecture, engineering and construction, power generation, biomedical and electronics.

More than 90 car manufacturers use the PowerFLOW product, and these manufacturers include 13 of the largest producers. The company generated its first commercial revenue in 1994, and increased it for 18 consecutive years. The IPO for the company took place in June 2012, and was much watched by market participants as it was one of the first IPOs to launch on the Nasdaq after the debut of Facebook Inc (NASDAQ:FB), which was troubled by a number of technical issues on the exchange.

The company recently posted disappointing quarterly earnings of 1 cent per share; analysts were expecting 3 cents per share, although revenue did beat estimates at $13.10 million. As a consequence of the earning miss, many analysts have cut their price targets for the stock, with Cannacord Genuity, for example, lowering their target to $10.50 from $12.50.

As of this writing, EXA trades at $8.34 a share, having been in a downtrend for several months – the stock hit its 52-week high of $13.40 last October.

Disclosure: none