In this article, we discuss the top 5 stocks to buy according to John Orrico’s Water Island Capital. If you want to read our detailed analysis of Orrico’s history and hedge fund performance, go directly to the Top 10 Stocks to Buy According to John Orrico’s Water Island Capital.
5. Nuance Communications, Inc. (NASDAQ:NUAN)
Water Island Capital Stake Value: $108,313,000
Percentage of Water Island Capital’s 13F Portfolio: 6.23%
Number of Hedge Fund Holders: 61
Nuance Communications, Inc. (NASDAQ:NUAN) is a Burlington, Massachusetts-based multinational computer software technology firm that sells voice recognition and AI-based software. Segantii Capital, with approximately 7.62 million shares worth $482.81 million, is the largest shareholder of Nuance Communications, Inc. (NASDAQ:NUAN) among the funds tracked by Insider Monkey.
Water Island Capital started building its position in Nuance Communications, Inc. (NASDAQ:NUAN) in the second quarter of 2021 and increased its stake in the company by 36% to 1.97 million shares in the third quarter, accounting for 6.23% of the value of its 13F portfolio.
At the end of the third quarter of 2021, 61 hedge funds tracked by Insider Monkey held stakes totaling $4.87 billion in Nuance Communications, Inc. (NASDAQ:NUAN), down from 72 in the preceding quarter, which were valued at $5.58 billion.
In its third-quarter 2021 investor letter, Rhizome Partners mentioned Nuance Communications, Inc. (NASDAQ:NUAN). Here is what the fund said:
“We also exited our small position in Nuance upon Microsoft’s acquisition. Nuance is a leader in voice recognition software, with dominant market share, and its speech-to-text product is the gold standard in radiology. In addition, by eliminating the need for note taking and allowing doctors to focus on patient care, Nuance could transform the way doctors treat patients. We built a 1% position in Nuance after attending its comprehensive investor day. Our view is that if Nuance can successfully grow its voice-recognition software in doctor’s offices, it could be worth multiples of our cost basis. Microsoft’s acquisition eliminated the multi-bagger upside but also partially validates the belief that Nuance is a high-quality technology company. We exited Nuance with a 62% gain in less than a year. This example is representative of the slight adjustments we made to our portfolio construction. We will allocate to small bets on technology and high-growth companies that could increase our exposure to “right tail” upside. Rest assured that our focus is still roughly 50% real estate, 30% high-quality companies trading at cheap multiples of free cash flow, and the rest in investments with the potential for growth and higher upside.”
