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5 Small Caps That Hedge Funds Love

A look at the potential boomer stocks favored by the 'smart money'

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#5. Polycom

Polycom185Change in investment from last quarter: +$48 million
Total hedge fund investment vs. market cap:
$110.7 million of $1.8 billion
YTD returns: 4% vs. 17% for the S&P 500

Polycom (PLCM) provides telecommuting and video conferencing tools. It has a very close relationship with Microsoft (MSFT) and its Skype property, as well as its suite of Office software, to focus its business on enterprise clients looking to boost productivity of remote workers.

Polycom hasn’t exactly gone like gangbusters in 2013, lagging the market significantly and down about 60% from its 2011 peak. However, the company has turned around from a money-losing fiscal 2012 and is profitable once more, and hopefully will see an uptick in enterprise spending as the economy gains steam.

The bottom line is that Polycom is in a good segment of the business software market as telecommuting and remote access increasingly become the norm. Whether it can fend off competitors like Citrix (CTRX) and its GoToMeeting or similar competitors is the million-dollar question for investors and hedge funds alike, however.

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