We recently published a list of 7 Stocks Billion Dollar Hedge Fund Voss Capital Is Crazy About. In this article, we are going to take a look at where SolarWinds (NYSE:SWI) stands against other stocks that Voss Capital is crazy about.
A fund management company, Voss Capital is based in Houston and was founded in 2011 by Travis Cocke who currently serves as the fund’s General Partner and Chief Investment Officer. He manages Voss’ funds. Interestingly, Voss is an acronym which stands for Value-Oriented Special Situations.
Before launching Voss, Cocke served as a Generalist Research Analyst at Ascendant Advisors LLC. from August 2009 to July 2010. Cocke was also an intern at the Teacher Retirement System of Texas during the summer of 2008.
He obtained a Bachelor of Business Administration in Finance from Texas A&M in 2009.
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In addition to concentrating on value stocks and special situations, as implied by the words that make up Voss’ acronym, the fund manager focuses on fundamentals. Special situations are unusual developments that affect companies. Additionally, Voss seeks to invest in stocks that it believes can double within three years.
Our Methodology
The following data is gathered from Voss Capital’s investment letter for the first quarter of 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here). That’s why you should pay close attention to this important indicator.
A systems administrator sitting at their desk surrounded by computer monitors, overseeing a complex infrastructure.
SolarWinds (NYSE:SWI)
Value of Voss Capital’s 13F Position (6/30/2024): $44 million
SolarWinds (NYSE:SWI) provides software that facilitates the management of computer networks. According to Voss, SolarWinds (NYSE:SWI) as of May was transitioning from selling software to providing subscriptions to a hybrid cloud offering and a cloud solution.
Voss noted that SolarWinds (NYSE:SWI)’s margins were very high, while its revenue growth was beginning to accelerate.
In the third quarter, however, SolarWinds (NYSE:SWI)’s sales rose just 6% versus the same period a year earlier to $200 million. However, its adjusted EBITDA did jump 13% year-over-year to $96 million, while its gross margin came in at a very high 89.5%, up from 88.7% in Q3 of 2023.
On Dec. 19, Wedbush Securities initiated coverage of SolarWinds (NYSE:SWI) stock with an Outperform rating and a $19 price target. According to Wedbush, SolarWinds (NYSE:SWI) is well-positioned to benefit from companies’ needs to access their data from multiple environments.
Voss wrote that there a high chance of SolarWinds (NYSE:SWI) receiving a takeover offer “within the next year or so.”
Analysts, on average, expect SolarWinds (NYSE:SWI)’s earnings per share to fall slightly to $1.07 in 2025 from $1.09 in 2024.
The shares have climbed 17% since May 24.
Overall, SWI ranks 4th on our list of stocks billion dollar hedge fund Voss Capital is crazy about. While we acknowledge the potential of SWI, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SWI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.