Many leading funds filed forms 13-D and 13-G (and form 4) with the SEC on Friday, January 6th, including Morgan Stanley, Soros Fund Management and Tontine Partners, 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 middle 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 stock mentions in filings on Friday (for more info on Forms 13-D and 13-G, and how to interpret that, please refer to the end of this article):
Universal Display Corp. (PANL): PANL is a designer of organic light emitting diode (OLED) devices for use in flat panel displays, solid-state lighting, and other applications mostly in the consumer electronics market. Insiders currently hold 2.8 million shares or 6.1% of outstanding shares. On Friday, hedge fund Discovery Capital Management, headed by Tiger Cub (of Julian Robertson fame) Robert Citrone, also 10% beneficial of the company, filed that they added another 90,000 shares to their holdings on top of the total of 650,000 shares we reported earlier that they bought since the end of Q3. Discovery now holds 5.8 million shares, an increase of 0.8 million from the 5.0 million that they reported holding in their 13-F Q3 filing, making them the largest institutional holder of PANL with 12.5% of outstanding shares. PANL is among the most heavily shorted stocks in the market, with shorts currently accounting for 28.4% of its float. Emotions certainly run very strong on both sides of the argument in the case of this stock, as on the one side you have PANL trading at a high 44-45 forward P/E and 4.8 P/B, while on the other side bulls will point to an exploding market for OLED displays that is expected to more than triple just in the next two years that should be a tremendous boost to PANL's revenues and earnings from licensing and materials. Nevertheless, continuing purchases by Discovery, the largest institutional holder of PANL shares, can be interpreted as a sign of confidence that at least this knowledgeable insider sees additional upside from current levels.
Zynga Inc (ZNGA): ZNGA develops, markets and operates online social games such as CityVille, FarmVille, FrontierVille, and others, making them available worldwide on various platforms, including Facebook, MySpace, and Yahoo, as well as the iPad, iPhone, and Android devices. On Friday, Morgan Stanley (MS) filed SEC Form SC 13G indicating that it held 16.0 million or 2.2% of outstanding shares, an increase of 10.7 million shares from the reported 5.3 million shares that it bought for its mutual funds last February. Morgan Stanley which recently brought Zynga public last month, in its IPO on December 16th, may have bought at least some of these shares as part of their underwriting agreement. ZNGA, which debuted at $10 and traded as high as $11.50 on the opening day, is now trading firmly below the offer price and testing the lows. The concern here is that the valuation of over $7 billion at the offer price was just too high, with most of the value having been captured by private investors prior to the IPO. Furthermore, there is also uncertainty as Zynga's business model is still evolving, as although it has over 150 million monthly users, it depends mostly on a limited number of big spenders ("whales"), with the rest paying nothing.
LinkedIn Corp. (LNKD): LNKD operates an online professional network via its proprietary social networking platform that enables members to create, manage and share their professional identities online, build and engage with their professional network, access shared knowledge and insights, and find business opportunities. On Friday, Morgan Stanley (MS) filed SEC Form SC 13G/A indicating that it held 4.1 million or 4.1% of outstanding shares, an increase of 1.8 million from the 2.3 million that they reported holding at the time of their 13-F Q3 filing. Like in the case of ZNGA above, LNKD has not performed well since its IPO, and while prices are still well above the $45 IPO, most retail investors bought the IPO in the $80 to $120 range. However, unlike in the case of ZNGA above, LNKD arguably has a more refined business model and a more committed group of users that give it a strong competitive edge. Its shares trade at a premium of over 120 forward P/E compared to the 28.2 average for its peers in the internet services group; however, growth is also extremely strong, with revenues currently growing at over 100% and forward earnings estimates by analysts implying a 70%+ growth going forward. Besides MS, a number of other leading institutions including Wellington Management and T Rowe Price recently also increased their holdings in LNKD since the end of Q3.
Ciena Corp. (CIEN): CIEN is a designer of Ethernet transport and switching systems used in network infrastructure by telecom and cable service providers. On Friday, Soros Fund Management filed SEC Form SC 13G/A indicating that it held 5.9 million shares, an increase of 0.8 million from the 5.1 million shares that it reported at the time of its last 13G filing on September 23rd last year. Besides Soros Fund Management, a number of other leading institutions have also recently increased their holdings in CIEN shares since the end of Q3, including Loomis Sayles & Co., Platinum Investment Management and Fidelity Investments. CIEN shares have been weak recently, down over 40% in the past year, and trading close to its lows at a premium 14-15 forward P/E compared to the 12.4 average for its peers in the fiber-optics group, while earnings are projected to rise strongly from 25c loss in 2010 to 52c profits in 2012 to 94c in 2013.
Broadwind Energy Inc. (BWEN): BWEN manufactures wind turbine gears and towers, and other fabricated and machined products for the energy, mining and infrastructure sector customers primarily in the U.S. On Friday, Jeffrey Gendell's $5+ billion hedge fund Tontine Partners filed SEC Form SC 13D/A indicating that it now held 17.8 million or 12.7% of outstanding shares, a reduction of 1.5 million from the 19.3 million shares that it held at the time of its 13-F Q3 filing. Of the 1.5 million shares, 0.96 million were distributed on January 4th to investors in connection with the redemption of ownership interests in its hedge fund held by those investors, and earlier on October 3rd Tontine similarly distributed another 0.56 million shares in connection with redemptions. BWEN currently trades at its lows, down more than 95% from its all-time high of almost $30 in mid-2008, including a 70%+ fall in the past year.
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.
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