P.A.W Capital’s Long-term Technology Picks Stole The First Quarter

Peter A. Wright‘s P.A.W Capital Partners recently disclosed its equity portfolio as of the end of March in a 13F filing with the Securities and Exchange Commission. Quite a few of the fund’s top picks posted double digit gains over the quarter. Wright, a Cornell University Graduate, founded P.A.W Capital in 1990. Currently the firm has about $207 million in assets under management. In order to generate double digit returns for its investors, P.A.W Capital pays special attention to growth oriented companies operating in rapidly changing industries. The market value of the fund’s equity portfolio increased to $101.25 million at the end of the first quarter from the $94.58 million it stood at to close the previous quarter. The technology sector represented 53% of the portfolio value with the top long-term equity holdings consisting of Web.com Group Inc (NASDAQ:WWWW)IGATE Corp (NASDAQ:IGTE) and Lifelock Inc (NYSE:LOCK). Stock picks from other sectors that headed the portfolio and have formed part of Wright’s bets for more than a year included Fairway Group Holdings Corp (NASDAQ:FWM) and Allot Communications Ltd (NASDAQ:ALLT).

Sergey Nivens/shutterstock.com

Sergey Nivens/shutterstock.com

As far as the imortance of tracking hedge funds is concerned, we discovered through our research that a portfolio of the 15 most popular small cap picks of hedge funds beat the S&P 500 Total Return Index by nearly a percentage point per month between 1999 and 2012. On the other hand the most popular large cap picks of hedge funds underperformed the same index by 7 basis points per month during the same period. In forward tests since August 2012 through March 2015 the top 15 small-cap stocks beat the market by a hefty 79.4 percentage points (read the details here). Hence a retail investor needs to isolate himself from the herd of investors chasing large-cap stocks and take advantage of the prevalent arbitrage opportunities in the market by concentrating on these money-making small-cap stocks.

Coming back to P.A.W Capital’s equity portfolio, the fund’s largest holding was in Web.com Group Inc (NASDAQ:WWWW). The $1.17 billion provider of internet services such as domains, website design, search engine optimization and e-commerce solutions etc., to small businesses has been in the fund’s portfolio dating all the way back to pre-2010. During the first quarter, the stake in Web.com Group Inc (NASDAQ:WWWW) was increased by 10% to 430,000 shares valued at $8.15 million. The company’s stock is up by nearly 20% year-to-date amid solid financial results for the first quarter, which included an EPS of $0.56, coming in $0.03 ahead of estimates, and revenues of $137.69 million that beat expectations by $2.05 million. Ahmet Okmus‘ Okmus Fund Management is the largest stockholder of Web.com Group Inc (NASDAQ:WWWW) with 7.78 million shares that represent 14.8% of the company’s outstanding common stock.

With 1.09 million shares valued at $7.38 million, Fairway Group Holdings Corp (NASDAQ:FWM) represented P.A.W’s second largest holding at he close of the first quarter. The fund initiated a position in the company during the first quarter of 2014, and after increasing its stake in subsequent quarters, it shed 70,000 shares in the most recent quarter. Fairway Group Holdings Corp (NASDAQ:FWM) has appreciated by a staggering 40.63% year-to-date. The company’s new leader, CEO Jack Murphy has made considerable operational improvements and investors are now more optimistic about the future outlook for the food retailer. Besides P.A.W Capital, Jim Simons‘ Renaissance Technologies and David Shaw’s D E Shaw are two other shareholders of Fairway Group Holdings Corp (NASDAQ:FWM).