Many leading funds filed forms 13-D and 13-G (and form 4) with the SEC this week, including Blackrock Inc., T Rowe Price, Citadel, Taconic Capital Advisors, Fidelity Investments, and Wellington Management, indicating that they had amended their ownership in U.S. traded public companies operating in the technology sector. The forms are required to be filed within ten days, so the institutions traded these shares sometime during and after the last few days of December. Also, we have included, when applicable, 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 in the technology sector this week (for more info on Forms 13-D and 13-G, and how to interpret that, please refer to the end of this article):
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. Earlier this week, three major institutions filed SEC Forms 13D/G indicating that they increased their holdings in LNKD. On Tuesday, T Rowe Price filed SEC Form SC 13G/A indicating that it held 6.0 million or 15.2% of outstanding shares, an increase from the 0.14 million shares it held at the end of Q3. Also, on Tuesday, Wellington Management filed SEC Form SC 13G/A indicating that it held 2.0 million or 5.1% of outstanding shares, an increase from the 0.4 million it held at the end of Q3, and prior to that on Monday, Tiger Global Management filed SEC Form SC 13D/A indicating that it held 4.0 million or 9.1% of outstanding shares, an increase from the 0.3 million shares it held at the end of Q3. Also, prior to that, last week we reported that Morgan Stanley (MS) increased its holdings in the company.
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 other recent tech IPO's like ZNGA that has also fallen off, 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 130 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.
Ciena Corp. (CIEN): CIEN is a designer of Ethernet transport and switching systems used in network infrastructure by telecom and cable service providers. On Thursday, Chicago-based hedge fund company Citadel LLC, headed by Kenneth Griffin and with over $22 billion invested in equities at the time of its 13-F Q3 filings, filed SEC Form SC 13G indicating that it held 5.3 million or 5.4% of outstanding shares, an increase from the 0.25 million shares it held at the time of its 13-F Q3 filing. Institutions have recently piled into CIEN, as besides Citadel, we also reported just last week that Soros Fund Management increasing its holdings in CIEN, and earlier than that last month we reported that Loomis Sayles & Co. (with $142 billion in assets under management) had initiated a new position in the company. CIEN shares have been weak recently, down about 40% in the past year, and trading close to its lows at a premium 15-16 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.
CA Inc. (CA): CA is a premier international developer of information technology (IT) management software products that operate on a range of hardware platforms and operating systems. On Wednesday, New York-based hedge fund company Taconic Capital Advisors, with over $3 billion in equity assets under management, filed SEC Form SC 13D indicating that it held 25.35 million or 5.14% of outstanding shares, an increase from the 24.7 million it held at the time of its 13-F Q3 filing. Taconic outlined in its filing actions that management could take to increase the value of its common stock, which they believe is currently undervalued. These actions include increasing the amount of cash returned to shareholders, implementing an efficient capital structure, elevating profit margins in Enterprise Solutions to appropriate levels, and implementing a senior management compensation structure that is based primarily on total shareholder returns.
Spreadtrum Communications Inc. (SPRD): SPRD is a Chinese fabless designer of baseband processor and RF transceiver solutions for wireless communications market. On Tuesday, FMR LLC (Fidelity Investments) filed SEC Form SC 13G/A indicating that it held 14.7 million or 10.1% of outstanding shares, including 9.7 million held by FMR LLC, 4.6 million held by FIL Ltd. (also commonly referred to as Fidelity Worldwide Investment), and the rest by wholly-owned subsidiaries of FMR LLC. This is an increase from the 1.7 million held by FMR and the 1.1 million held by FIL Ltd. at the time of its 13-F Q3 filing. With the additional investment, FMR and FIL continued to be the largest institutional holders of SPRD. The stock trades at a discount 6-7 current P/E on a TTM basis, and at 2.9 P/B. compared to the averages of 13.2 and 1.6 for its peers in the electronic components semiconductor group, while earnings are projected to grow modestly from $2.53 in 2011 to $2.72 in 2012.
Acme Packet Inc. (APKT): APKT manufactures session border controllers, load balancers, routing proxies and multi-service security gateways. Its products are used in session delivery networks that enable delivery of next-generation voice, video and unified communications over IP networks. On Tuesday, FMR LLC filed SEC Form SC 13G/A indicating that it held 2.6 million or 3.8% of outstanding shares, a decrease from the 5.2 million shares it held at the time of its 13-F Q3 filing. APKT has been very weak recently, down over two-thirds from the highs last April, and it trades at a current 26-27 P/E on a TTM basis and 4.3 P/B compared to averages of 17.2 and 1.3 for its peers in the communications infrastructure group.
On top of these, some additional 5% ownership SEC Form 13-D and 13-G filings on major stocks earlier this week include the ones filed by Blackrock Inc. (BLK) on Tuesday indicating that it amended its ownership in fabless semiconductor company LSI Corp. (LSI) to 77.8 million shares; Wellington Management's filing on Tuesday indicating that it amended its ownership of USA Technologies Inc. (USAT), a provider of networking devices for data management, non-cash payment processing and energy management, and now holds 0.8 million shares; FMR LLC's filing on Tuesday that it held 1.0 million shares of healthcare related content provider WebMD Health Corp. (WBMD), a decrease from the 2.3 million it held at the end of Q3; and FMR LLC's filing on Tuesday that it held 11.2 million shares or Fusion-IO (FIO), a developer of a storage memory platform for data decentralization, an increase from the 3.7 million shares it held at the end of Q3.
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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