Many investors are on the horns of a dilemma when it comes to deciding between investing in value stocks or growth stocks. A growth-focused portfolio is generally anticipated to generate higher returns than a value-oriented portfolio, but the risks associated with the former are usually higher as well. Truth be told, great growth stock picks may definitely beat the broader market over a long-term investment horizon. Weatherbie Capital LLC is a Boston-based investment firm that specializes on small growth companies that can deliver both strong earnings growth and high investment quality. Put it differently, the investment firm founded by Matthew A. Weatherbie, seeks for reasonably-priced stocks relative to their growth and quality. Weatherbie Capital recently filed its 13F filing for the September quarter, so this article will lay out its five top stock picks.
We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 135% since then and outperformed the S&P 500 Index by around 80 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.
#5 ExamWorks Group Inc. (NYSE:EXAM)
Shares Owned by Weatherbie Capital LLC (as of September 30): 1.18 million shares
Value of Holding (as of September 30): $34.38 million
Weatherbie Capital LLC upped its position in ExamWorks Group Inc. (NYSE:EXAM) by 153,547 shares or roughly 15% during the third quarter, which accounted for 3.99% of the firm’s equity portfolio on September 30. The provider of independent medical exams can be undeniably categorized as a growth company, considering that it has a forward P/E ratio of 39.92 (the ratio for the S&P 500 equals 17.65). ExamWorks Group’s stock is down 40% year-to-date, partly owing to the company’s weaker-than-expected revenue guidance for the fourth quarter and full-year. The company lowered its full-year revenue growth guidance to the range of 4.5%-to-5%, down from 4.5%-to-6.5%. James A. Noonan’s Pivot Point Capital owned 1.40 million shares in ExamWorks Group Inc. (NYSE:EXAM) on June 30.
#4 Signature Bank (NASDAQ:SBNY)
Shares Owned by Weatherbie Capital LLC (as of September 30): 250,913 shares
Value of Holding (as of September 30): $34.52 million
The Boston-based investment firm enlarged its stake in full-service commercial bank Signature Bank (NASDAQ:SBNY) by 7,083 shares during the September quarter. The commercial lender has seen its shares advance nearly 24% since the beginning of the year, and may go even higher should the Federal Reserve decide to raise interest rates this year. The company’s third-quarter net interest margin, which represents the ratio of the discrepancy between the interest income received and its interest expenses over the interest-earning assets, dropped 5 basis points to 3.22%. Signature’s trailing P/E ratio suggests that the stock is fairly valued at the moment (trailing P/E ratio of 22.76 for the shares of Signature versus 23.41 for the S&P 500). Clifford Fox’s Columbus Circle Investors cut its exposure to Signature Bank (NASDAQ:SBNY) during the third quarter by 121,541 shares, remaining with 46,305 shares.
#3 Wabash National Corporation (NYSE:WNC)
Shares Owned by Weatherbie Capital LLC (as of September 30): 744,663
Value of Holding (as of September 30): $36.18 million
Wabash National Corporation (NYSE:WNC) had a terrible third quarter in terms of stock performance, but Weatherbie Capital enlarged his holdings in the company by 123,835 shares during the turbulent three-month period. Meanwhile, the shares of the producer of commercial trucking equipment have gained 23% since the beginning of the current quarter, and are nearly 3% in the green year-to-date. It is worth mentioning that both the trailing and forward P/E ratios of the company suggest that its shares are undervalued at the moment. Just recently, Wabash’s management has raised its full-year non-GAAP adjusted earnings guidance to the range of $1.38 to $1.43 per diluted share, marking a year-on-year increase of 58% at the midpoint of the range. Joel Greenblatt’s Gotham Asset Management held a 2.23 million-share position in Wabash National Corporation (NYSE:WNC) at the end of the June quarter.
#2 Wayfair Inc. (NYSE:W)
Shares Owned by Weatherbie Capital LLC (as of September 30): 1.27 million shares
Value of Holding (as of September 30): $44.41 million
Wayfair Inc. (NYSE:W) gained a few spots on Matthew A. Weatherbie’s list of top stock picks during the third quarter as his investment firm lifted its position in the e-commerce company by 266,515 shares. The shares of Wayfair have almost doubled since the beginning of the year, and some analysts believe that they are poised to go higher in the forthcoming months. Just recently, financial services company Raymond James upgraded the stock to ‘Strong Buy’ from ‘Outperform’ and raised its prices target to $60 from $55, citing the company’s stronger-than-expected financial results for the third quarter. The freshly-upped price target yields an upside of at least 50%. Eric Bannasch’s Cadian Capital acquired a 897,293-share stake in Wayfair Inc. (NYSE:W) during the second quarter.
#1 BofI Holding Inc. (NASDAQ:BOFI)
Shares Owned by Weatherbie Capital LLC (as of September 30): 426,552 shares
Value of Holding (as of September 30): $54.95 million
BofI Holding Inc. (NASDAQ:BOFI) was Weatherbie Capital’s largest equity holding at the end of the third quarter, representing 6.37% of its entire equity portfolio. Even so, the Boston-based investment firm cut its position in the holding company of BofI Federal Bank by 144,675 shares during the September quarter. The shares of the company had been delivering a great performance until a highly-scrutinized scandal sparked in October. In mid-October, an article written by The New York Times disclosed that a former internal auditor of the bank filed a lawsuit alleging that he was fired “after revealing what he believed to be wrongdoing at the bank to federal regulators and management at Bank of Internet”. However, the stock is still 22% in the green this year, despite plunging significantly in October. Jim Simons’ Renaissance Technologies was bullish on BofI Holding Inc. (NASDAQ:BOFI) at the end of the second quarter, holding 175,000 shares.