Investing
Fund Managers Load Up on 5 Mid-Cap Growth Stock Leaders
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To say that hedge fund and mutual fund managers tend to follow the herd is an incredible understatement and always has been. While publicly they sometimes seem reluctant to discuss their holdings, especially stocks they short, the reality is managers tend to talk among themselves as they run in the same circles. Often those discussions are centered around their portfolios and what is in them.
In a recent Jefferies report, superb equity strategist Steven DeSanctis breaks down the top holdings in not only all three market capitalization groups — large cap, mid-cap and small cap — but also into core, growth and value categories.
Here are the top five holdings of mid-cap growth managers.
CoStar Group
This may be a surprise pick as a top holding of mid-cap fund managers, but this stock is widely held across Wall Street. CoStar Group Inc. (NASDAQ: CSGP) provides commercial real estate information, analytics and online marketplaces. Key brands are CoStar, Apartments.com and LoopNet. Across its sites, the company attracts over 34 million unique monthly visitors. In 2017, CoStar generated $965 million in revenue.
The company’s suite of online services enables clients to analyze, interpret and gain unmatched insight on commercial property values, market conditions and current availabilities. LoopNet is the most heavily trafficked commercial real estate marketplace online, with over 5 million monthly unique visitors per month.
A whopping 48.3% of fund managers own shares of this company, as it continues to gain a wider following across Wall Street.
The Wall Street consensus price target is $400.40. The stock closed trading on Friday at $376.93, in a 52-week trading range of $213.59 to $381.21.
Align Technology
This stock has been on fire over the past year and a recent pullback could be offering investors a great entry point. Align Technology Inc. (NASDAQ: ALGN) designs, manufactures and markets a system of clear aligner therapy, intra-oral scanners and computer-aided design and computer-aided manufacturing (CAD/CAM) digital services for use in dentistry, orthodontics and dental records storage in the United States and internationally.
The company’s Clear Aligner segment offers Invisalign Full, a treatment used for a range of malocclusion. Its Invisalign Teen treatment addresses orthodontic needs of teenage patients, such as compliance indicators, compensation for tooth eruption and six free single arch replacement aligners. And its Invisalign Assist treatment is for anterior alignment and aesthetically oriented cases.
Align’s chief financial officer, John Morici, recently spoke to ongoing traction in China, Japan and EMEA, while certain Greenfield markets (India and Brazil) should play a bigger role in coming years. Furthermore, Morici highlighted that Align’s global supply chain effort is just underway, which should further aid international growth in coming years.
Some 46.4% of the fund managers own these shares, and the stock continues to be a high-profile momentum play.
The consensus price objective is $289.58. Shares closed Friday at $247.07. The 52-week range is $118.08 to $287.42.
ServiceNow
This is another red-hot momentum stock that has had an outstanding year. ServiceNow Inc. (NYSE: NOW) develops and sells a hosted, subscription-based suite of services designed to automate various IT department functions, such as help desk, operations management and change/release management.
The company also sells a number of applications that automate various self-service-related applications outside of the IT department, such as HR onboarding, facilities requests and governance, risk and compliance.
Some 46.4% of fund managers also own this one, and buyers rushed in when the stock sold off in late March.
The consensus price target is $171.74, but shares closed just above that level Friday at $168.90. The 52-week range is $88.80 to $176.56.
Microchip Technology
This company is a huge Internet of Things benefactor. Microchip Technology Inc. (NASDAQ: MCHP) is a leading provider of microcontroller, mixed-signal, analog and flash-IP solutions, providing low-risk product development, lower total system cost and faster time to market for thousands of diverse customer applications worldwide.
The company recently received a receipt of antitrust clearance in the United States for the proposed acquisition of Microsemi. The company now expects to complete the acquisition of the company in June of this year.
About 41.2% of fund managers own this stock, which has the potential to shoot higher as arbitrage accounts close out short positions held during the acquisition of Microsemi.
Investors receive a 1.69% dividend. The $111.56 consensus price objective compares with the most recent close at $85.68. The 52-week range is $73.87 to $101.48.
Worldpay
This one may be a touch of the radar but could be offering aggressive accounts some big-time upside potential. Worldpay Inc. (NYSE: WP) is the combination of Worldpay and Vantiv, which recently merged to form the new company. Worldpay provides payment processing and network services for merchants and financial institutions worldwide.
The company operates two primary segments. The primary business within Merchant Services is merchant acquiring, which consists of authorization, clearing and settlement of transactions, and reporting. The Financial Institution Services segment consists of issuer processing, card issuance and network processing for financial institutions worldwide.
Some 39.6% of managers own this up-and-coming payments company. Many on Wall Street feel it is a potential takeover candidate.
The consensus price objective is $91.63. Shares were last seen at $81.20, in a 52-week range of $59.10 to $85.53.
These five top mid-cap growth plays are better suited for aggressive accounts. With earnings still to come, and many trading close to 52-week highs, it may make sense for investors interested in owning shares to buy partial positions now and see how the first-quarter results fare.
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