Fund Managers Loading the Boat on 5 Small-Cap Growth Winners

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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 small-cap growth managers.

Proofpoint

This company has long been mentioned as a potential takeover candidate and it is also a top pick across Wall Street. Proofpoint Inc. (NASDAQ: PFPT) provides threat protection, incident response, regulatory compliance, archiving, governance, eDiscovery and secure communication solutions worldwide. Its security-as-a-service solutions comprise an integrated suite of on-demand data protection solutions that enable large and midsized organizations to defend, protect, archive and govern their sensitive data.

The company provides Proofpoint Enterprise Protection, a communications and collaboration security suite designed to protect customers’ mission-critical messaging infrastructure from outside threats, including spam, phishing, unpredictable email volumes, malware and other forms of objectionable or dangerous content before they reach the enterprise.

E-mail protection remains a top priority for many companies, and this is a distinct positive for Proofpoint. The company recently entered into definitive agreement to acquire Cloudmark for $110 million in cash, which strengthens its industry-leading investment in messaging security and threat intelligence.

A whopping 47.1% of manager’s own shares of this top security company, and with good reason. Threats continue to grow, as do the skills of the purveyors of those threats.

The Wall Street consensus price target was last seen at $123.41. The stock traded early Wednesday at $120.55 a share, in a 52-week range of $74.42 to $127.35.

HealthEquity

This stock has been on fire this year, up almost 50% since the first of January. HealthEquity Inc. (NASDAQ: HQY) provides a range of solutions for managing health care accounts, including Health Savings Accounts (HSAs), Health Reimbursement Arrangements (HRAs) and Flexible Spending Accounts (FSAs), for health plans, insurance companies and third-party administrators.

Health Equity offers technology-enabled services platforms that allow consumers to make health care saving and spending decisions. Its platform provides an ecosystem in which consumers can access their tax-advantaged health care savings, compare treatment options and pricing, evaluate and pay health care bills, receive personalized benefit and clinical information, earn wellness incentives and make educated investment choices to help in their tax-advantaged health care savings. Its products and services include health care saving and spending platform, health savings accounts, investment advisory services, reimbursement arrangements and health care incentives.

Portfolio managers love this company, and 45.9% have the stock in their portfolios, according to the report.

The posted consensus price objective is $67.27. The shares traded at $64.50 Wednesday morning. The 52-week trading range is $40.21 to $68.75.