Want to invest like an elite hedge fund or become an investor in a hedge fund? Hedge fund investing may be quite expensive if considering the 2-and-2o fee structure most hedge funds use, but one can follow the moves made by reputable and successful managers instead. Quarterly 13F filings represent a common way of tracking hedge funds’ moves, but this practice seems to be more suitable for long-term oriented investors. Another way of monitoring smart money investors’ moves is to focus on their 13D, 13G and Form 4 filings, which usually tend to offer more up-to-date insights about their stances on certain companies. For that reason, this article will discuss the content of three public 13Gs filed by several hedge funds tracked by Insider Monkey.
Hedge funds have been underperforming the market for a very long time. However, this was mainly because of the huge fees that hedge funds charge as well as the poor performance of their short books. Hedge funds’ long positions performed actually better than the market. Small-cap stocks, activist targets, and spin offs were among the bright spots in hedge funds’ portfolios. For instance, the 15 most popular small-cap stocks among hedge funds outperformed the market by more than 53 percentage points since the end of August 2012 (read the details here). This strategy also managed to beat the market by double digits annually in our back tests covering the 1999-2012 period.
In a freshly-amended 13G filing, Nantahala Capital Management LLC, managed by Wilmot B. Harkey and Daniel Mack, reported owning 4.51 million shares in FalconStor Software Inc. (NASDAQ:FALC), which account for 11.0% of the company’s outstanding common stock. This compares with the 3.77 million-share position owned at the end of September, disclosed in Nantahala’s latest 13F filing. To begin with, the shares of the software-defined storage company are up 36% in 2015. The company’s business involves selling software solutions and platforms on subscription or consumption basis. FalconStor Software Inc. (NASDAQ:FALC)’s total revenue for the first nine months of this year reached $39.2 million, up 14% year-on-year. However, the company has a working capital deficiency and a stockholders’ deficit, mainly as a result of its deferred revenues balance of $15.5 million, which might hinder the company’s marketing activities and other initiatives. Even so, FalconStor outlines that there is enough liquidity to run its marketing efforts in connection with its new product offering, FreeStor, and expand its portfolio of software offerings.
In the meantime, the number of hedge funds from our extensive database with stakes in the company climbed to six from five during the September quarter, while the overall value of those stakes grew to $12.34 million from $10.19 million. These smart money investors owned 15.10% of the company’s shares at the end of September. John Zaro’s Bourgeon Capital cut its exposure to FalconStor Software Inc. (NASDAQ:FALC) by 19% during the third quarter, remaining with 1.07 million shares.
Follow Wilmot B. Harkey And Daniel Mack's Nantahala Capital Management
The second page of this article discusses Gates Capital Management’s position in an oilfield technology company and Scopia Capital’s move on a coupon websites’ owner.