Netflix (NFLX), Michael Kors (KORS), Yelp (YELP): Apex Capital’s Top Q2 Stock Picks

Sanford (Sandy) Colen’s Apex Capital LLC has filed its most recent 13F with the SEC, disclosing its equity portfolio as of the period of report, March 31, 2015. The Orinda, California-based fund’s portfolio consisted of 35 long positions, with the total value of the portfolio standing at just under $1.43 billion. While the fund’s top three positions are the same from the previous reporting period, with its Netflix, Inc. (NASDAQ:NFLX) holding still leading the way, a newly-opened position in a small-cap company did crack the top five.

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That new small-cap pick is notable to us given the fact that we run a successful small-cap strategy that is based on the best small-cap picks of top investors like Colen. These money managers are heavily invested in the success of their small-cap picks and have poured considerable resources into identifying undervalued or under-the-radar companies to invest in. Our research has shown that they have much greater success with those small-cap picks than they do with their large-cap picks, because of the edge they have over the average investor when it comes to analyzing these lesser-known companies, an edge which is mostly lost on large-cap stocks. We have found that collectively, hedge funds’ top 15 small-cap picks provide a great investment opportunity, with our strategy having returned over 137% since it was launched at the end of August 2012 (see the details), beating the market by more than 140% during that time.

Netflix, Inc. (NASDAQ:NFLX) remains Apex’s top long position for the fourth straight quarter, and despite its big gains of 21.98% during Q1, Apex added slightly to the position, showing continued optimism for  its long-term performance. Apex’s position was upped by 3% to 233,450 shares, with a value of $97.28 million as of the end of March. Short-term at least, the continued optimism has proven very wise, as Netflix, Inc. (NASDAQ:NFLX) has bounded up by another 33.55% in April.

While its latest earnings announced in April missed estimates, the video streaming subscription service continued to corral big subscriber numbers, shattering the estimates as it cruised past the 60 million subscriber number for the first time. Still, there are concerns that the burgeoning costs associated with Netflix, Inc. (NASDAQ:NFLX)’s procurement and production of new content will seriously hamper earnings without continued major growth in subscriber numbers. Regardless,Netflix has some serious investing power in its corner, including the likes of Carl Icahn and Stephen Mandel.

Luxury brand Michael Kors Holdings Ltd (NYSE:KORS) remains in second spot in Apex’s portfolio for the second straight quarter. Unlike Netflix, Michael Kors had a disappointing quarter, its stock shedding 12.45%. Apex also increased its position in Michael Kors Holdings Ltd (NYSE:KORS) during the quarter, by 12% to just under 1.01 million shares, which had a value of $66.25 million. Also unlike Netflix, Michael Kors has continued its swoon into Q2, sliding another 6% in April. The dips may provide the perfect opportunity for investors to open a position or build their existing ones, as analysts are quite bullish on the stock. The average price target among 17 analysts is over $82, an upside of over 30%, and the stock trades at a forward P/E ratio of just 13.05. Mandel is also heavily invested in Michael Kors Holdings Ltd (NYSE:KORS), along with fellow billionaire investors Rob Citrone, Ken Griffin, and Israel Englander.

MicroStrategy Incorporated (NASDAQ:MSTR) remains in third position in Apex’s equity portfolio, with the fund holding a $53.62 million position consisting of 316,900 shares, which was a decrease of 19% from the previous filing. MicroStrategy Incorporated (NASDAQ:MSTR) is a stock which has frustrated Apex in the past, as over a year ago, the fund sent a letter to the company’s board, expressing concerns over its corporate governance and communication with shareholders, to which the company never responded. Regardless, Apex clearly still believes in the prospects of the business software producer, which it first invested in back in 2012. Ricky Sandler’s Eminence Capital is also a believer in MicroStrategy Incorporated (NASDAQ:MSTR), owning the largest position in our database as of the end of 2014. Shares of MicroStrategy were up by 4.18% during the first quarter.

Actavis plc (NYSE:ACT) moves up to fourth position in Apex’s portfolio and the fund also maintains a large position of call options (its eighth-most valuable position overall). The fund’s long position consisted of 175,000 shares valued at $52.08 million, a 12% increase from the previous quarter. Shares of Actavis plc (NYSE:ACT) appreciated by over 15% during Q1, but have dipped by 5% thus far in Q2. Previously the top healthcare stock among funds we track, it will be interesting to see the fund reaction to the stock now that its deal to purchase Allergan has closed. Among the big shareholders of the pharmaceutical giant are Andreas Halvorsen, Dan Loeb, and Daniel Och.

Apex’s top new position is in Yelp Inc (NYSE:YELP), the online platform for connecting businesses and customers. The fund opened a new position of 1.06 million shares during Q1, valued at $50.31 million. While we can only speculate as to when exactly during Q1 the shares were bought, it’s possible the stock’s big dip in early February made in an attractive investment for Apex. That dip was predicated on sliding user numbers, with unique users falling on both desktop and mobile devices (the latter being the more worrisome figure). While Yelp Inc (NYSE:YELP) shares had made up more than half of those losses leading into its latest earnings report, released yesterday, it gave them all back following earnings and revenue that missed estimates, as well as future guidance that fell short of estimates. That will come as bad news to Eashwar Krishnan’s Tybourne Capital Management, which had nearly 12% exposure to Yelp Inc (NYSE:YELP), which was its top pick heading into 2015.

Disclosure: None