Prominent Hedge Fund Prescott Group Buying Some Little-Known Plays
By Hioara Dumitru
Prescott Group Capital Management is a registered investment advisor founded in 1992 by Phil Frohlich. The firm invests in small and mid-cap publicly traded securities through private limited partnerships, and has an equity portfolio worth around $450 million under its control. As a legal SEC requirement, institutional investors have to present quarterly 13F forms within a period of 45 days after the end of each quarter. Retail investors can capitalize on this phenomenon, but they have to know where to look first (learn the secrets of this strategy).
According to the data available, Prescott Group’s 13F portfolio has grown by $80 million since the end of 2012, with a particular penchant for tech stocks.
Phil Frohlich’s big bet in the first quarter was Air Transport Services Group (ATSG), as the fund’s 5.7 million share-stake stayed constant from the previous three-month period. Prescott remains the second biggest institutional investor in the company, and that’s no wonder: The company’s stock trades at a P/E ratio of 9.15, which is the lowest for the air delivery and freight services industry. Shares sport a trailing EPS of $0.65, and a solid profit margin of 6.86% is one reason bulls are optimistic.
The Best of the Rest
Nature’s Sunshine Products (NATR) is yet another position in Prescott’s 13F portfolio with no changes in share value, but a modest value increase. Shares trade at a P/E ratio of 9.89 and a forward P/E spotted at the same level. The price has increased by 10.46% over the past year, and the stock pays a forward dividend rate of $0.40 at a yield of 2.80%.
Prescott still keeps a position of 1.8 million shares in Silicon Graphics International (SGI), though he was particularly bearish on it last quarter (selling 169,800 shares), reporting a Q1-end value of $25.8 million. The stock now trades at forward P/E ratio of 13.44 with a trailing EPS of -$0.52, and an estimated EPS growth of 241.9% next year, the highest in its industry. Shares have popped 135% over the past 12 months, and generally speaking it’s tough to bet against a momentum play like this.
BioScrip (BIOS) is next on this list, and the fund dropped its stake by 20.74% last quarter to a level of $12.6 million. This fall meant the position is now just 2.82% of its total 13F portfolio compared to a value of 4.14% in the previous quarter. The company’s shares trade at a trailing P/E ratio of 11.99 and a diluted trailing EPS of $1.15.
Last, but not least, we have BluePhoenix Solutions (BPHX) (now MDSY), in which Prescott held its position steady at 2,424,845 shares in the first quarter. The company’s stock trades at a trailing EPS of -$1.91 and a beta of 2.53. Its price has almost doubled over the past 12 months.
Phil Frohlich and Prescott Group chose the way of enlargement by diversification last quarter, and each of the positions discussed above are worth watching (continue preparing for 13F-filing season here).