Palo Alto Networks Inc (PANW) & More: $1.5 Billion Small-Cap Specialist Has Been Buying

Every quarter, many money managers have to disclose what they’ve bought and sold, via “13F” filings. Their latest moves can shine a bright light on smart stock picks.

Today, let’s look at Stephens Asset Management Group, which focuses on small- and mid-cap companies and aims to hold core growth stocks as well as ones that it expects will grow due to various internal or external catalysts. The outfit takes a bottom-up analysis approach and also factors behavioral finance into its thinking. Its chief investment officer is Ryan Crane.

The company’s reportable stock portfolio totaled $1.5 billion in value as of March 31, 2013.

Interesting developments
So what does Stephens’ latest quarterly 13F filing tell us? Here are a few interesting details:

The biggest new holdings are Abaxis Inc (NASDAQ:ABAX) and Trex Company, Inc. (NYSE:TREX). Other new holdings of interest include networking and security specialist Palo Alto Networks Inc (NYSE:PANW). Palo Alto has been growing rapidly, recently posting a 70% year-over-year gain in revenue, for example. It has been giving competitors such as Cisco Systems, Inc. (NASDAQ:CSCO) and Check Point Software Technologies Ltd. (NASDAQ:CHKP) a run for their money — so much so that some speculate a rival might just buy the company. It seems richly valued, but some are still tantalized.

Among holdings in which Stephens increased its stake was Ruckus Wireless Inc (NYSE:RKUS), which went public late last year. It’s also battling bigger rivals such as Cisco in the Wi-Fi arena, but its last earnings report was solid and it has had some success in signing contracts. It’s tackling, among other markets, hotels and railroads.

Palo Alto Networks Inc (NYSE:PANW)Stephens’ reduced its stake in lots of companies, including Allot Communications Ltd. (NASDAQ:ALLT). The stock has delivered average annual growth of 30% to shareholders over the past five years, but it’s down more than 50% over the past year. Part of the problem is Europe’s economic malaise. On the plus side, Allot did score a relatively big contract recently, and it’s well positioned to profit by hastening and managing Internet traffic.

Finally, Stephens’ biggest closed positions included Insperity Inc (NYSE:NSP) and Stifel Financial Corp. (NYSE:SF). Other closed positions of interest include Smith & Wesson Holding Corporation (NASDAQ:SWHC) and Mellanox Technologies, Ltd. (NASDAQ:MLNX). You might think a gun maker such as Smith & Wesson would be a poor investment, given increased national hand-wringing over gun violence. You’d be wrong, though, as that hand-wringing has resulted in limited reforms. Indeed, fears of increased regulations have led to a surge in sales as some stock up. The company’s last earnings report featured revenue up 39% and earnings tripling.