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By Eric Winter

Beating the market is no easy feat; beating it by 15 percentage points or higher is that much more impressive. Funds employ hundreds of analysts to do countless amounts of research to pick the right stocks, and they often find some of their largest winners in the sub-$5bn market cap realm. We have done our own analysis of many of the top funds' top small-cap holdings to determine a list that has proven to generate substantial alpha. Over the past 5 months, this method has returned 25.4% vs. 7.4% for the S&P 500 (learn more about our hedge fund small cap strategy here). Multi-billionaire Bruce Kovner of legendary Caxton Associates has averaged a similar return (21%) per year for 18 years, and we have compiled a list of some of the fund's small-cap holdings here:

Equipment rental company United Rentals, Inc. (URI) has about 3.3mm shares under Caxton's ownership, amounting to roughly $15mm. The stock had an impressive 2012, growing 27% in share value, but with a slightly nerving beta of 3.0. Twelve sell-side analysts have weighed in to say that the appreciation in price is not over yet; their mean price target stands at 13% away from current trading levels. URI recently reported earnings on January 23rd, beating by a considerable amount and continuing the trend of the previous four consecutive beats. Sean Cullinan of Point State Capital has built the largest position out of the funds we follow, snatching up nearly $100mm worth of shares in URI.

Caxton also holds Synovus Financial Corp. (SNV), and at $33mm invested, it is the fund's largest small-cap holding. Fortunately for Caxton, it was also the best performing stock on this list, generating a return near 40% in the last 12 months. Equally impressive is the stock's willingness to pay a dividend. The yield of 1.5% may not be much, but the fact that a small-cap can afford to pay out cash dividends is a positive sign. SNV is popular with fellow billionaire Ken Griffin, who has $10mm more invested than Caxton (take a look at his fund Citadel's holdings here).

Pharmaceutical companies are no strangers to the small-cap space, and unfortunately, many never break past their size due to failed drug offerings, poor trials, or insufficient FDA approval. Caxton is betting on a more positive outlook for VIVUS, Inc. (VVUS). Considering its recent approval troubles for its obesity drug in Europe, as well as its consistent negative earnings and downgrades, Caxton may see its holdings in VVUS as a pure speculative play. SAC subsidiary Sigma Capital Management may be in the same betting boat with its recent large addition to VVUS.

Wireless service provider MetroPCS Communications, Inc. (PCS), valued at $3.6bn, snaps up almost $20mm of Caxton's dollars. The prepaid cell phone company has not realized the same success as some of its larger brothers like AT&T, which was most likely one of the driving factors behind PCS' recent merger with T-Mobile USA. The stock struggled through 2012, ending the year on a relatively flat note. However, with the support of T-Mobile, analysts are projecting 18% growth in the stock this year, which could spell out a large winner for investors. Billionaire John Paulson has nearly $280mm in the stock (read more about his holdings within Paulson & Co. here).

Ubiquitous apparel maker Abercrombie & Fitch Co. (ANF) tops out our list of Caxton's main small-cap holdings, and he has built positions with both cash and options, holding stock and calls. The company operates adult and kids stores under their namesake, as well as through the Hollister and Gilly Hicks brands. ANF had consistent earnings surprises throughout 2012, and is due to almost quadruple its earnings according to estimates versus the previous quarter (due to inflated holiday numbers). Keep a lookout for ANF's next earnings announcement on February 13th. We join BMO Capital and Avondale Partners by being bullish on the brand. Billionaire trader Paul Tudor Jones has nearly a million shares, and it is one of his top five seasonal positions.

Source: Billionaire Bruce Kovner's Largest Small-Cap Positions