This Small-Cap Stock With 100% Upside Potential Tops Hedge Fund Adage Capital’s Portfolio

Adage Capital increased its stake by 10% in Reliance Steel & Aluminum (NYSE:RS) to over 3.3 million shares valued at $202 million in the quarter ending March 31. After suffering continuous decline in 2014, shares of the metal processing company have remained mostly flat in 2015, up around 3.5%. On June 8, Metals USA, a subsidiary of Reliance Steel & Aluminum (NYSE:RS) was awarded a $120 million contract by the Pentagon.  For the quarter ending March 31, the company reported EPS of $1.30 on revenue of $2.61 billion, compared to EPS of $1.18 on revenue of 2.58 billion for the same period last year. The average recommendation of analysts covering the stock is ‘Overweight’, with an average price target of $67.70, upside potential of about 5%. Apart from Adage, Chuck Royce’s Royce & Associates is also a major shareholder in Reliance Steel & Aluminum (NYSE:RS), holding slightly over 4.0 million shares in the company as of March 31.

Although Adage reduced its exposure in Burlington Stores Inc (NYSE:BURL) by 39% to 3.17 million shares valued at $188 million in the first quarter, the company still remains the third most valuable small-cap position of the fund. Shares of Burlington Stores Inc (NYSE:BURL) have been on a constant uptrend since its IPO in October 2013 and in March 2015 made their all-time high of $61.94, hence Adage reducing its exposure could be seen mostly as a profit booking exercise. Out of 12 analysts who cover the stock, ten of them have a ‘Buy’ rating on it and the average price target of analysts is $62.25, upside potential of over 25%. Burlington Stores Inc (NYSE:BURL) revised its fiscal year 2016 outlook on March 9 and now expects EPS for the year to come in the range of $2.15-$2.25, slightly lower than analysts’ estimate of $2.28. Similar to Adage cutting back its exposure, Ken Griffin’s Citadel Investment Group also reduced its stake in the company by 33% to 2.75 million shares in the first quarter.

Disclosure: None