By: Alex Oleinic
Ken Fisher oversees an equity portfolio worth more than $40 billion, according to Fisher Asset Management's latest 13F. And while the firm's top holdings involve companies like Pfizer (PFE), Johnson & Johnson (JNJ) and American Express (AXP) among others, we should not ignore the smaller names as well. Due to the fact that the smart money's favorite small-cap picks represent the best investment opportunities (learn why here), let's take a look at Fisher's top five holdings in this space.
Parexel International (PRXL) is Ken Fisher's largest small-cap. His firm owns around 2.6 million shares of the biotech and medical research company, worth an aggregate value of $132 million. At the beginning of this month, two analysts increased their targets for Parexel. ISI Group upgraded it from "Neutral" to "Buy," setting its PT to $57 from $52.5, while Sterne Agee raised its PT to $51.07 from $36. Shares of Parexel have climbed over 6% since the first upgrade, and fellow mega-investors Chuck Royce and Jim Simons are both bullish as well.
SVB Financial Group (SIVB) comes next, with Fisher disclosing a $128.3 million stake that amasses around 1.5 million shares of the company. Shares of SVB Financial, with a market cap of $4.3 billion, have returned 70% since the beginning of the year. The financial services company provides commercial banking services through its Silicon Valley Bank, which has strong credit ratings of A2 and A- at Moody's (MCO) and Standard & Poor's; both agencies hold stable outlooks on the company. SVB Financial also posted secure results in the second quarter of the year, with net income of $48.6 million, up 12% year-over-year. The sell-side expects long-term annual earnings growth to range between 10% and 11% over the next half-decade.
Another small-cap in Fisher's equity portfolio is Domino's Pizza (DPZ), with a stake of $126.2 million. Recently, the pizza delivery company posted its results for the third quarter, showing an EPS boost of 19% over the year, but this number missed estimates ever so slightly. Nonetheless, Domino's board declared a dividend of $0.2 per share for the quarter, and shares are up 52% year-to-date. At 23 times forward earnings, Domino's is fairly valued, so it appears that Fisher is here for the growth prospects.
Fisher also owns shares of the $4.3 billion market cap outdoor retailer Cabela's (CAB). Fisher Asset Management disclosed ownership of some 2.0 million shares of the company in the third quarter, with an aggregate value of $123.6 million. Fisher has held this stock for more than three years (as far back as we track him), and it has rewarded him well; shares of Cabela's are up more than 300% since the beginning of 2010. Cabela's plans to open around 1 million square feet of new retail stores per year beginning this year, which amounts to approximately 14 stores annually.
Fifth & Pacific
Fifth & Pacific Companies (FNP) is last but certainly not least. Fisher reported that he holds 4.4 million shares of the company worth a total value of $108.9 million. He's the second largest prominent investor in Fifth & Pacific of the funds we track, second to Alexander Mitchell and Scopus Asset Management. At the beginning of October, Fifth & Pacific, which holds a portfolio of premium retail brands, agreed to sell the intellectual property of its Juicy Couture brand to Authentic Brands Group. The transaction amounts to $195 million and is supposed to close in November.
Fifth & Pacific also signed a short-term licensing agreement with Authentic Brands, which will allow the former to transition its business in an orderly fashion during the first half of 2014, with $10 million worth of guaranteed minimum royalties payable to Authentic Brands. Shares of Fifth & Pacific went up by 5% on the day of the announcement earlier this month, and are up another 2% since then.