Many leading fund managers, including guru Mason Hawkins of Southeastern Asset Management, mega fund managers JPMorgan Chase & Co. (JPM), T Rowe Price (TROW) and energy sector-focused Kayne Anderson Capital, as well as billionaire David Bonderman of TPG Group Holdings, filed forms 13-D and 13-G with the SEC in the last week, indicating that they had amended their ownership in U.S. exchange traded basic materials and energy companies
The 13-D/G reports are statements of significant ownership of more than 5% of the voting class of a company's securities, and they are also important due to their timeliness. While 13-F filings are quarterly, and are required to be reported within 45 days after the end of the quarter, 13-D/G's are required to be filed within ten days of the underlying transaction. Furthermore, 13-D/G's are often a precursor to a hostile takeover, company breakup or other "change of control" events, and will often include a letter to management explaining the reason for their taking a large stake in the company, thereby giving more insight into the transaction.
Mega fund manager JPMorgan Chase & Co., with $1.35 trillion in assets under management, including $308 billion in 13-F assets, filed SEC form SC 13G/A on May 7th indicating that it holds 7.25 million shares of Axiall Corp. (AXLL), adding 1.00 million shares to the 6.25 million shares that it reported holding at the end of Q1/2013. Besides JPMorgan, AXLL has been a favorite among other large or mega fund managers as well. In our database of 27 of the world's largest or mega fund managers, that together manage over $30 trillion in assets, four of them indicated via 13D/G 5% ownership filings that they added to their positions since the end of the latest quarter (Q4/2012) for which collective or consensus picks data is available for leading fund managers. Fidelity Investments added 8.33 million shares, BlackRock added 2.43 million shares, and JPMorgan has added a total of 7.22 million shares since the end of Q4/2012.
Axiall Corp. is an integrated chemicals and building products company that manufactures chlorovinyls, aromatics, chlorine, caustic soda and vinyl chloride monomer. It is the result of a merger between the PPG Industries (PPG) commodity chemicals business and Georgia Gulf that previously traded under the symbol GGC and operated in the chemicals and building products markets. In its latest reported March quarter, which it issued last Wednesday, the company missed both analyst revenue and earnings estimates, with earnings at 75c missing by a wide margin the analyst estimate of $1.17, and revenue coming in $50 million short of the $1.11 billion analyst estimate. The stock as a result plummeted as much as about 20% before recovering, and currently trades well below its price of $56.51 before the earnings report.
The company attributed the miss mostly to unfavorable weather conditions, in terms of colder temperatures in the markets in which it operates, hurting the demand for its building products, and also higher ethylene costs. At current prices in the $50 range, its shares trade at 9-10 forward P/E based on FY 2014 earnings compared to the average of 12.5 for its peers in the diversified chemicals group, while earnings are projected to rise strongly from $3.51 in FY 2012 to $5.19 in FY 2014. While the current quarter was disappointing, we believe that the drop resulting from that could be a buying opportunity, given the projected growth in earnings, its discount valuation compared to its peers, and the projected recovery in the U.S. housing market which could give a strong boost to its building products business. Technically, the stock is sitting near the 200-day moving average, so we would scale into it gradually, adding more if it falls below the moving average.
Besides AXLL, the following are additional institutional 13-D/G filings in the last week in the basic materials and energy sectors (see table above):
- Newmont Mining Corp. (NEM), which produces gold in the U.S., Australia, Peru, Indonesia, Canada, New Zealand, Ghana and Mexico, in which Los Angeles-based Capital Group Co., with $1.1 trillion in 13-F assets, filed SEC form SC 13G/A on May 10th indicating that it holds 1.33 million shares, cutting 27.20 million shares from the 28.53 million shares that it reported in a prior 13D/G filing on February 13th.
- Cemex Sab (CX), a Mexican manufacturer of cement, ready-mix concrete, aggregates and related materials that are used for housing and residential developments, as well as for commercial, institutional and infrastructure projects, in which value guru Mason Hawkins' Southeastern Asset Management, that manages the Longleaf Partners Funds, and with $22.8 billion in 13-F assets, filed SEC form SC 13G/A on May 10th indicating that it holds 495.10 million shares or 49.51 million ADRs, cutting 6.28 million ADRs from the 55.79 million that it reported holding in an earlier filing on April 10th.
- Northern Tier Energy (NTI), an independent oil and gas refining and marketing company that operates an oil refinery in Minnesota, storage and transportation assets, and a 166 convenience store chain under the SuperAmerica brand primarily in MN and WI, and in which billionaire David Bonderman's TPG Advisors, with $48 billion in assets under management, filed SEC form SC 13D/A indicating that it holds 48.92 million shares, cutting 12.00 million shares from the 60.92 million shares that it reported holding in an earlier 13D/G filing on February 8th.
Energy Transfer Equity LP (ETE), which owns a diversified portfolio of energy assets, including natural gas gathering and transportation pipelines, natural gas treating and processing assets, and three natural gas storage facilities, in which Los Angeles-based Kayne Anderson Capital Advisors, which manages over $19.4 billion in investments, including $9.92 billion in 13-F assets, filed SEC form SC 13G/A indicating that it holds 13.07 million shares, cutting 1.51 million shares from the 14.58 million shares that it reported holding at the end of the recently reported 1Q/13 quarter. Kayne Anderson just reported its March quarter 13-F filing at the end of last week.
Forest Oil Corp. (FST), which is engaged in the exploration and production of oil, natural gas and natural gas liquids primarily in North America, with interest in the Texas Panhandle, the Western Canadian Sedimentary Basin in Alberta and British Columbia, the Eagle Ford Shale in South Texas, and the East Texas/North Louisiana area, in which BlackRock, the largest institutional manager in the world, with over $3.6 Trillion under management, including $1.1 trillion in 13-F assets, filed SEC form SC 13G/A indicating that it holds 12.77 million shares, adding 1.04 million shares to the 11.73 million shares that it reported at the end of Q1/2012.
- WPX Energy (WPX), previously a wholly owned subsidiary of Williams Co. (WMB), before it was spun-off in late 2011, which is an independent energy exploration and production company, engaged in the production of natural gas, natural gas liquids (NGLS) and oil from non-conventional resources such as tight-sands and shale formations, as well as coal-bed methane reserves, in which mega fund manager T Rowe Price, with $542 billion in assets under management, filed SEC form SC 13G/A indicating that it held 20.50 million shares, adding 10.46 million shares to the 10.04 million shares that it reported holding at the end of 4Q/2012.
Credit: Fundamental data in this article were based on SEC filings, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
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