Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Medivation Inc (MDVN), Frontier Communications Corp (FTR) And More: Hedge Fund Adage Capital Management’s Small Cap Picks

The most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year, according to our research on 13F filings (learn more about hedge funds’ small cap picks). We think that this is because small cap stocks, which we define as those between $1 billion and $5 billion in market capitalization, receive less attention from large institutional investors such as mutual funds and so are more likely to be undervalued or overvalued. We can also use our database of 13F filings to see individual funds’ top small cap picks. Read on for the five largest holdings of stocks in that valuation range which Phil Gross and Robert Atchinson’s Adage Capital Management owned at the end of December or see the full list of Adage’s stock picks.

Frontier Communications Corp (NASDAQ:FTR)

The fund increased the size of its position in Frontier Communications Corp (NASDAQ:FTR) by 11% to a total of almost 35 million shares. Frontier Communications Corp (NASDAQ:FTR) is a telecommunications company offering a high dividend yield- over 9% at current prices and dividend levels. However, the company has significantly reduced its quarterly dividend payments to 10 cents per share; they were 25 cents per share three years ago. Frontier Communications Corp (NASDAQ:FTR)’s business has also been in decline, with revenue and earnings slipping, and despite the high yield 22% of the float is held short.

Gross, Atchinson, and their team were buying shares of Armstrong World Industries, Inc. (NYSE:AWI) during the quarter. The $3 billion market cap building materials company focuses on floor and ceiling materials. It’s another somewhat popular short target, with the most recent data showing short sellers responsible for 14% of the float. The markets are pricing in growth, with Armstrong World Industries, Inc. (NYSE:AWI) trading at 23 times trailing earnings, yet revenue and net income were about flat in the most recent quarterly report compared to the fourth quarter of 2011.

Medivation Inc (NASDAQ:MDVN) was another of Adage’s small cap picks. The biotechnology company has developed Xtandi, a drug which is used to treat prostate cancer patients post-chemotherapy, and some analysts are hopeful that the product will be approved for other uses including pre-chemotherapy. As a development state company Medivation Inc (NASDAQ:MDVN) is unprofitable, but the stock price has risen 46% in the last year on optimsm. Billionaire Andreas Halvorsen’s Viking Global reported a position of 3.4 million shares at the end of December (find Halvorsen’s favorite stocks).

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.