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

Adage slightly cut its stake in Children’s Place Retail Stores, Inc. (NASDAQ:PLCE), a retailer of children’s apparel with a market capitalization of $1.1 billion, but still owned 2.2 million shares. In its most recent quarter, which ended in early February 2013, sales grew 11% compared to the same period in the previous fiscal year though earnings were up a more modest 6%. With trailing and forward P/Es of 18 and 13, respectively, the stock looks to be priced about right in terms of current growth performance.

WABCO Holdings Inc. (NYSE:WBC) rounds out our list of the fund’s five largest holdings in this market capitalization range. The sell-side finds the stock cheap, with a five-year PEG ratio of 0.7 stemming from a trailing earnings multiple of 14 and decent growth expectations. However, the auto parts company’s business has been weak recently, it’s of course tied strongly to the broader economy with a beta of 2.3, and we imagine that many auto related stocks- including the automakers- might make more likely value prospects than WABCO Holdings Inc. (NYSE:WBC).

As such we would avoid WABCO and prefer to consider other companies tied to auto demand. Armstrong and Children’s Place Retail Stores, Inc. (NASDAQ:PLCE) don’t look too attractive in value terms either, and of course investors should be very wary of actually investing in development stage biotech companies. That leaves Windstream, whose dividend payments are certainly risky but may be worth considering as a small, more speculative holding in a large income portfolio which is based in larger and more reliable companies.

Disclosure: I own no shares of any stocks mentioned in this article.