Many leading funds filed forms 13-D and 13-G with the SEC on Tuesday, December 27th, including QVT Financial and ValueAct Capital Management, indicating that they had amended their ownership in U.S. traded public companies. The forms are required to be filed within ten days, so the institutions traded these shares sometime after the first week of December. Also, we have included here SEC Form 4 filings by Institutions that are considered corporate insiders by virtue of their holding more than 10% ownership, and in many cases, having representation on the Board of Directors. The following are the most notable filings last Tuesday (for more info on Forms 13-D and 13-G, and how to interpret that, please refer to the end of this article):
Lexicon Pharmaceuticals (LXRX): LXRX is a development stage biotech company focused on the discovery and development of protein drugs to treat various human diseases. It is a leader in defining the functions of genes for drug discovery using large-scale knockout mouse technology, and it invented high-throughput gene trapping technology to discover thousands of genes and expand its OmniBank library of tens of thousands of mouse clones. On Tuesday, New York-based Invus Public Equities Advisors filed SEC Form SC 13D/A indicating that it now holds 280.2 million or 58.3% of outstanding shares, a steep increase from the 169.0 million shares it held at the time of its 13-F Q3 filing. This is the second institution that recently increased its holdings in LXRX, after Fidelity Investments that filed SC 13-G in the second week of December indicated that it too increased its holdings in LXRX to 62.6 million or 17.6% of outstanding shares, well above the 43.8 million shares it held at the time of its 13-F Q3 filing. LXRX shares are currently down 15% YTD, and they trade within striking distance of its all-time lows.
Endocyte Inc. (ECYT): ECYT develops targeted therapies using small molecule drug conjugates for the treatment of cancer and inflammatory diseases. On Tuesday, Boston-based biotech focused hedge fund RA Capital Management filed SEC form SC 13G indicating that it now holds 2.6 million or 7.3% of outstanding shares, an increase of 2.2 million shares from the 0.4 million shares that it held at the time of its 13-F Q3 filing. We wrote recently about RA Capital's top biotech new buys and sells in Q3, noting that ECYT was a new purchase in Q3. This is the second biotech-focused institutional investor that has purchased ECYT recently as we noted just last Thursday that CA-based venture capital firm Sanderling Venture Partners that specializes in investing in biotech companies filed SEC Forms 4 indicating that they purchased an additional 440,000 shares for $1.4 million, increasing their ownership to 4.5 million shares. Furthermore, insiders have also been on a buying spree at ECYT recently, as five insiders together reported purchasing 226,000 shares in December. ECYT shares are among December's strongest movers to the downside (down by two-thirds so far), after the company announced on December 13th the results of supplemental analyses of its phase 2b PRECEDENT trial. The heavy insider and sector-focused institutional buying is particularly notable in this context as it signifies that knowledgeable insiders and institutions through their buying of company shares seem to think that the selling is overdone here, portending that we may be near a bottom.
Scorpio Tankers Inc. (STNG): STNG provides seaborne transportation services for crude oil and petroleum products with a fleet of ten vessels. On Tuesday, New York-based shareholder activist hedge fund QVT Financial, with over $1.2 billion in equity assets under management, filed SEC Form SC 13G indicating that it now holds 2.1 million or 5.5% of outstanding shares, an increase of 0.8 million shares from the 1.3 million shares they held at the time of their 13-F Q3 filing. This is the second institutional investor that recently indicated increasing its position in STNG, as just last week Oceanic Investment Management filed SEC form SC 13G indicating that it too increased their holding of STNG to 2.0 million or 5.1% of outstanding shares, an increase from the 0.9 million shares that it reported holding at the time of its 13-F Q3 filing. Also, in our review of mega funds, we noted that the largest institutions (the likes of Fidelity, Goldman, etc.) cumulatively added to their position in STNG in Q3. STNG shares currently are down over 50% YTD, and it generates losses and trades at 0.5 P/B compared to the average of 1.2 for the shipping group.
Orexigen Therapeutics (OREX): OREX develops pharmaceuticals by combining various generic drugs to treat central nervous system disorders, including obesity. On Tuesday, New York-based shareholder activist hedge fund QVT Financial, with over $1.2 billion in equity assets under management, filed SEC Form SC 13G indicating that it now holds 5.3 million or 9.8% of outstanding shares, an increase of 3.5 million shares from the 1.8 million shares that it held at the time of its 13-F Q3 filing. OREX shares are trading near their lows, down 80% for the year, after a huge 72% drop on February 1st when the company announced that the FDA issued a Complete Response to their New Drug Application [NDA] for Contrave for the management of obesity.
Adobe Systems Inc. (ADBE): ADBE is a diversified software company operating worldwide, and it offers a line of creative, business, Web and mobile software and services that are used by creative professionals, knowledge workers, developers, marketers, enterprises and consumers. On Tuesday, San Francisco-based shareholder activist hedge fund manager ValueAct Capital Management, with $5.8 billion in assets under management, filed SEC Form SC 13D indicating that it now holds 24.5 million or 5.0% of outstanding shares, an increase of 7.8 million shares from the 16.7 million that it held at the time of its 13-F Q3 filing. ValueAct has been accumulating ADBE shares in recent quarters, as it added 12.0 million shares in Q3 to its 4.7 million shares prior quarter holding. ADBE shares are down slightly by 8% YTD, and it trades at a discount 10-11 forward P/E and 2.5 P/B compared to the averages of 34.1 and 3.8 for its peers in the computer software group.
CB Richard Ellis Group (CBG): CBG is a commercial real estate services company that provides advisory services, capital markets services, and valuation services to occupiers, owners, lenders and investors in office, retail, industrial, multi-family and other commercial real estate assets. On Tuesday, San Francisco-based shareholder activist hedge fund manager ValueAct Capital Management, with $5.8 billion in assets under management, filed SEC Form SC 13D indicating that it now holds 19.6 million or 6.0% of outstanding shares, an increase of 12.4 million shares from the 7.2 million that it held at the time of its 13-F Q3 filing. ValueAct has been accumulating CBG shares in recent quarters, as the 7.2 million shares it held at the end of Q3 was a new position for it in that quarter. CBG shares trade at their lows, cut in almost half from the $30 high in April this year, and it trades at 11-12 forward P/E and 4.5 P/B compared to averages of 18.2 and 1.8 for its peers in the real estate operations group.
Form 13-D is commonly referred to as "beneficial ownership report," and is required when a person or a group of persons acquires beneficial ownership of more than 5% of the voting class of a company's equity securities; form 13-G is the abbreviated version of the form that is allowed under certain circumstances.
The information in forms 13-D and 13-G is extremely timely, as it is required to be filed within ten days after the purchase, in contrast to 13-F quarterly filings by Institutions that are filed every three months. The information contained in 13-F filings, thereby, can as much as eighteen weeks old by the time it is disseminated to the public. Furthermore, by virtue of their 5% ownership in public companies, the information contained in the 13-D and 13-G filings indicates only high confidence or high conviction moves by institutions and insiders, and hence can be interpreted to be of greater relevance to the investment community than the 13-F quarterly filings. Furthermore, 13-D and 13-G filings often are a precursor to hostile takeover, company breakups and other "change of control" events, and often they will include a letter to management explaining the reason for their taking a large stake in the company.
Credit: Fundamental data in this article were based on SEC filings, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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