Professor Roger Ibbotson‘s Zebra Capital Management recently submitted its filing with the SEC for the period ending March 31. The firm’s filing showed that it had a public equity portfolio value of $194.65 million, a slight uptick from the end of 2014, while it controls about $400 million worth of assets under management. It was founded in 2001 by Roger Ibbotson, who is also the majority holder of the firm. Zebra Capital primarily centers its activities on equity-focused investment strategies for the best returns. Zebra Capital Management invests in different industries, with its main sectors being services, finance, technology, basic materials, consumer goods, and industrial goods. Having been keenly following the fund’s activities, Insider Monkey picked its top small-cap picks for the quarter (which also happen to be the fund’s top picks overall) and looked into their performance. These small-cap stocks are West Corp (NASDAQ:WSTC), Credit Acceptance Corp. (NASDAQ:CACC), and Syntel, Inc. (NASDAQ:SYNT).
Let’s first take a step back and analyze how tracking hedge funds can help an everyday investor. Through our research we discovered that a portfolio of the 15 most popular small-cap picks of hedge funds beat the S&P 500 Total Return Index by nearly a percentage point per month on average between 1999 and 2012. On the other hand the most popular large-cap picks of hedge funds underperformed the same index by seven basis points per month during the same period. This is likely a surprise to many investors, who think of small-caps as risky, unpredictable stocks and put more faith in large-cap stocks. In forward tests since August 2012 these top small-cap stocks beat the market by an impressive 84 percentage points, returning over 144% (read the details here). Hence a retail investor needs to isolate himself from the herd and take advantage of the best growth opportunities in the market by concentrating on small-cap stocks.
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At the end of the first quarter, Zebra Capital Management held a total of 103,018 shares of West Corp (NASDAQ:WSTC) valued at $3.48 million, having raised its stake in the company by more than 400% during the quarter. The company reported its first quarter results on May 5, posting $0.78 in earnings per share, beating analysts’ consensus estimate of $0.74. West Corp (NASDAQ:WSTC) had revenue of $565.50 million, slightly higher than the $565.00 predicted by analysts. The company posted $0.70 in earnings per share for the same period last year while its revenue for the first quarter of 2015 was by 5.7% year-over-year. Despite the strong results, the stock was recently downgraded by Zacks to a “Hold” rating from “Buy”. The company recently announced the acquisition of Intrafinity, Inc., a company doing business as SharpSchool, at an approximate price of $19 million. SharpSchool provides content management systems and software-as-a-service solutions to the education market. 26 hedge funds in our database had positions in West Corp (NASDAQ:WSTC) on March 31, with an aggregate of $201.57 million invested in the company. Bluemar Capital Management, Alyeska Investment Group, and Robert Gillam‘s Mckinley Capital Management are just a few of these funds.