Prescott Group Is Still High On These 5 Stocks

Prescott Group Capital Management, led by Phil Frohlich, reported a total of 164 positions in its latest 13F filed with the U.S. Securities and Exchange Commission for the reporting period of September 30. The value of the fund’s equity portfolio stood at $414.66 million. Founded by Phil Frohlich in 1992, Prescott Group has around $500 million in assets under management. The Oklahoma-based hedge fund focuses on small and mid-cap stocks. Prescott Group was very active during the third quarter, buying 12 new stocks, as well as increasing its stakes in over 25 companies. At the same time, the investor sold out of its stakes in over 25 companies. In this article, we will talk about Prescott Group’s top holdings, in terms of value.

Why do we pay attention to hedge funds’ moves? Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by more than 53 percentage points since the end of August 2012. These stocks returned a cumulative of 102% vs. a 48.7% gain for the S&P 500 Index (see the details here). That’s why we believe investors should pay attention to what hedge funds are buying.

5. Mattersight Corp (NASDAQ:MATR)

Shares held (as of September 30): 1,550,996

Total Value (as of September 30): $11.96 million

Percent of Portfolio (as of September 30): 2.88%

Prescott Group slightly upped its stake in Mattersight Corp (NASDAQ:MATR) to 1.55 million shares, valued at around $12 million. Mattersight Corp is engaged in personality-based software applications, using them to analyze and predict customer behavior based on the language exchanged during service and sales interactions. For the second quarter ended June 30, Mattersight reported revenue of $9.7 million, representing a 33% increase on a year-over-year basis. Net loss was $3.6 million, versus $3.3 million in the same quarter last year. This improvement in the company’s financial outlook seems to have had a good result on the stock, which has increased by 24.56% year-to-date. Another investor that has faith in Mattersight Corp (NASDAQ:MATR) is Mark N. Diker’s Diker Management, which holds 1.36 million shares of the company as of June 30.

4. Destination XL Group Inc (NASDAQ:DXLG)

Shares held (as of September 30): 2,141,029

Total Value (as of September 30): $12.44 million

Percent of Portfolio (as of September 30): 3.00%

Prescott Group’s position in Destination XL Group Inc (NASDAQ:DXLG) remained flat over the third quarter. The investor disclosed ownership of 2.14 million shares, valued at over $12 million. Destination XL Group is a specialty retailer of big and tall men’s apparel. The company expects to grow its DXL stores to about 230 locations by the end of 2017. For the second quarter of fiscal year 2015, the company narrowed its loss to $1.0 million, versus a loss of $4.0 million in the same period last year. Sales for the quarter rose by 9% to $114.1 million, compared to the previous year. Destination XL Group Inc’s stock is also showing improvement, gaining 20.58% during the last three months. Glenn J. Krevlin’s Glenhill Advisors also sees value in Destination XL Group Inc (NASDAQ:DXLG), owning 5.83 million shares.

On the next page, we will talk about Prescott Group’s top three stocks, starting with Servicesource International Inc (NASDAQ:SREV).

3. Servicesource International Inc (NASDAQ:SREV)

Shares held (as of September 30): 3,495,275

Total Value (as of September 30): $13.98 million

Percent of Portfolio (as of September 30): 3.37%

Prescott Group reduced its stake in Servicesource International Inc (NASDAQ:SREV) by 5% during the third quarter to around 3.50 million shares worth about $14 million. Servicesource International is a California-based company that provides B2B companies with expert managed services, cloud software, and processes to increase customer success, drive revenue growth, and decrease churn from existing customers. During the last three months, Servicesource International’s stock has dropped by over 9%. Another investor that loves Servicesource International Inc (NASDAQ:SREV) is Altai Capital, led by Rishi Bajaj, Toby Symonds, and Steve Tesoriere, which has a holding of 11.73 million shares of the company.

2. Nature’s Sunshine Prod. (NASDAQ:NATR)

Shares held (as of September 30): 1,865,383

Total Value (as of September 30): $22.35 million

Percent of Portfolio (as of September 30): 5.39%

Prescott Group’s stake in Nature’s Sunshine Prod. (NASDAQ:NATR) remained unchanged over the quarter. The fund revealed owning 1.87 million shares, valued at $22.4 million. Having a market cap of over $225 million, Nature’s Sunshine is a natural health and wellness company engaged in the manufacture and direct selling of nutritional and personal care products. For the third quarter of 2015, Nature’s Sunshine Prod. reported a decrease in income from continuing operations to $1.6 million, or $0.08 per diluted common share, versus $5.1 million, or $0.29 per diluted common share, in the same quarter last year. This seems to have had an impact on the company’s stock, which has dropped by around 19% year-to-date. Aside from Prescott Group, Nelson Obus’ Wynnefield Capital is also betting big on Nature’s Sunshine Prod. (NASDAQ:NATR), holding 2.03 million shares.

1. Air Transport Services Group Inc. (NASDAQ:ATSG)

Shares held (as of September 30): 4,936,333

Total Value (as of September 30): $42.21 million

Percent of Portfolio (as of September 30): 10.18%

Air Transport Services Group Inc. (NASDAQ:ATSG) remains Prescott Group’s top holding. However, the fund’s stake, containing 4.94 million shares, was decreased by 6% during the third quarter. With a market cap of over $651 million, Air Transport Services Group is engaged in providing aircraft leasing, airline operations, aircraft maintenance and other support services to the air cargo transportation and package delivery industries. Air Transport Services Group Inc. (NASDAQ:ATSG)’s stock has been another strong performer for Prescott Group this year, improving by 16.71% year-to-date. Among the largest shareholders of Air Transport Services among those that we track is Willem Mesdag’s Red Mountain Capital, which owns 11.15 million shares.

Disclosure: None