Small cap companies are generally defined as those with capitalizations between $300 million and $2 billion. While these smaller companies tend to present more risk and volatility than larger stocks, they also have a chance of higher returns and tend to have much less coverage from analysts and the media.
GuruFocus’ All-in-One Screener provides more than 150 filters to sort investment ideas, including a revenue filter to sort by capitalization. Using the screener, the following are four of the most popular small-cap stocks bought by the gurus during the fourth quarter.
Align Technology Inc. (ALGN, Financial)
Align produces a system of clear aligner therapy, intra-oral scanners and digital services used in dentistry, orthodontics and dental records storage. During the fourth quarter, six gurus purchased shares of the company, with Paul Tudor Jones (Trades, Portfolio) adding Align as a new holding in the portfolio.
Columbia Wanger (Trades, Portfolio) owns the largest stake among the gurus with 3.69% of shares outstanding.
Over the past year, the stock rose 28% and currently trades at almost 40x earnings. EPS for the full year 2015 was at the exact level of the prior year at $1.77.
Better than expected revenue was driven by Invisalign volume, which was up 26% year over year. Operating margin for the quarter was 25.8%, an increase from the previous quarter’s margin of 18.3%. The improved margin was due to higher clear aligner volume and lower expenses.
Veeco Instruments Inc. (VECO, Financial)
During the fourth quarter, seven gurus bought shares of Veeco Instruments, which produces light emitting diodes and hard-disk drives. Four of the gurus purchased new holdings in the stock including Joel Greenblatt (Trades, Portfolio) and Arnold Schneider (Trades, Portfolio).
The stock has sunk 41% over the past year and has reported losses for the past three years. Preliminary data for FY 2015 show losses of 80 cents per share, an improvement over losses of $1.70 per share in 2014.
In its earnings press release, Veeco said it continues to face a weak macro environment in 2016 and challenging LED industry conditions. Its guidance for the first quarter includes GAAP losses of 62 cents to 52 cents per share.
Ken Fisher (Trades, Portfolio) and First Pacific Advisors (Trades, Portfolio) are the two largest guru shareholders of the company with 4.57% and 4.07% of shares outstanding.
Parsley Energy Inc. (PE, Financial)
Parsley Energy develops unconventional oil and natural gas reserves in the Permian Basin. The stock rose 34% in the past year, five gurus purchased shares during the fourth quarter. Keeley Asset Management is the largest guru shareholder with more than 1.3 million shares.
Parsley reported loss per share of 14 cents in the fourth quarter, compared to EPS of 33 cents in the year-ago quarter. Net loss for the full year 2015 was $50.5 million, its first year in the red over the past five years.
NuVasive Inc. (NUVA, Financial)
NuVasive is a medical device company that develops minimally disruptive surgical products and procedures for the spine. The stock price traded flat over the past year, and six gurus purchased shares in the company during the fourth quarter. Event-driven and M&A investor John Paulson (Trades, Portfolio) bought a new holding during the quarter.
NuVasive completed its acquisition of Ellipse Technologies, which focuses on procedural solutions of complex skeletal deformity, for a $380 million upfront cash payment and potential $30 million payable in 2017 upon achievement of revenue targets.
For FY 2015 the company had EPS of $1.26, up from losses per share of 36 cents in 2014.
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