Investor and trader attention is often focused on the top news stories of the day, and their impact on stock prices, as they analyze whether to sell their holdings based on the news, to add to it, or to initiate a new long/ short position in the company's stock or derivatives (option positions). In this series, we aim to address that interest in a timely manner, bringing to you both what each individual group collectively bought and sold (i.e., legendary or guru fund managers and mega fund managers) for the most recently reported quarter. Since this data is filed quarterly, we will also update it with general information from any 13D/G filings since the end of the quarter.
The following are what we expect to be the major news movers today, based on major significant recent news. These are often news stories released just after the close the prior day, but almost always based on news no earlier than the past few days, as long as the stock is still moving under the momentum of that news.
Metabolix Inc. (MBLX) and Archer Daniels Midland (ADM): MBLX is a bioscience company well-known as the provider of the Mirel brand of PHA natural plastics that are environmentally sustainable and totally biodegradable, and a green alternative to petroleum-based plastics. It is engaged in the development of a proprietary platform technology for co-producing plastics, chemicals and energy from crops such as switchgrass, oilseeds and sugarcane.
The stock is expected to move strongly to the downside today after the company announced after-the-close on Thursday that Agribusiness giant Archer Daniel Midlands gave notice of termination of its Telles, LLC joint venture for PHA bioplastics, effective February 8th. ADM made that decision based on a strategic review of its business investments and activities, concluding that the financial returns from the alliance were too uncertain. The joint venture, established in 2006, sells PHA-based bioplastics, including Mirel and Mvera in the U.S., Europe and other countries. MBLX retains the IP rights to the technology, and management has announced its intent to open discussions with alternative manufacturing and commercialization partners.
In the most recent available Q3 filings, the world's largest or mega fund managers held $53 million of MBLX, selling a minor $1 million in Q3. However, the holding of 26.2% of the outstanding shares is in itself a bullish statement given that it is a low price and micro cap, and hence below the radar for most large funds. Furthermore, legendary or guru funds collectively did not hold a position in the company at the end of Q3. The top mega fund holders of MBLX at the end of Q3 were Fidelity Investments ($26 million), Vanguard Group ($8 million) and Barclays Global Investors ($6 million).
In the case of ADM, mega fund managers were bullish in Q3, adding a net $98 million to their $4.52 billion prior quarter position, with the largest buyers being Wellington Capital Management ($165 million), Invesco Ltd. ($146 million) and T Rowe Price ($116 million). Guru fund managers, in contrast, sold a net $33 million in Q3 from their $118 million prior quarter position, with the largest seller being Hussman Econometrics Advisors ($33 million). There were no 13D/G filings by guru or mega fund manager on MBLX or ADM since the end of the Q3.
JPMorgan Chase & Co. (JPM) is a global financial company providing private, commercial, and investment banking and treasury services in over 60 countries. The company among the first to report preliminary Q4 results, indicated that while EPS at 90c would meet analyst estimates, the company's revenue at $21.47 billion would miss the analyst $22.68 billion estimate by a wide margin. The bank cited that in Q4, fixed income revenue was off 13%, investment banking fees were off 13%, and mortgage loan originations were off 24% year-over-year.
It seems that in Q3, both guru and mega fund managers got it right. Mega fund managers cut $379 million in Q3 from their $50.03 billion prior quarter position, and guru fund managers cut even more aggressively in Q3, selling a net $577 million in Q3 from their $1.75 billion prior quarter position in the company. The biggest guru fund sellers were Viking Global Investors ($272 million) and Eton Park Capital Management ($171 million), and the biggest mega fund sellers were Fidelity Investments ($496 million) and Capital Research Global Investors ($372 million).
Eastman Kodak (EK) manufactures digital and film imaging systems for the photographic and graphic communications markets. The once-esteemed company is down almost 90% in the past year, and trades below $1, as it bleeds cash and battles bankruptcy, after behind left behind in the digital camera revolution. The stock has been volatile after-hours yesterday and in the pre-market today after a Bloomberg story emerged that the company was in talks with Citigroup (C) to provide emergency bankruptcy financing in the event that the company does file for bankruptcy.
In Q3, both guru and mega fund managers were bearish on EK. Mega fund managers held $41 million at the end of Q3, after selling a net $9 million, and the biggest sellers were Deutsche Bank ($2 million) and Goldman Sachs ($2 million). Guru fund managers were also bearish on EK, selling a net $2 million in Q3 from their $6 million prior quarter position in the company, with the top seller being Royce & Associates ($2 million). Since the end of Q3, two mega fund managers, BlackRock and Fidelity Investments, have amended their ownership of EK. Specifically, Fidelity Investments increased its ownership of EK to 11.0 million or 4.0% of outstanding shares, thereby ceasing to be a 5% or more beneficial owner.
Bank of America (BAC) is a global financial services company providing banking and financial services to individuals, small- and middle-market businesses, corporations, and governments primarily in the U.S., and also internationally in over 40 foreign countries. The stock is expected to open weak today as reports emerged that the bank has reportedly told U.S. regulators that it is willing to withdrawing from some parts of the country if its financial problems worsen. BAC shares currently trade near historic lows, at prices it traded at in the late '80s and early '90s, at a discount 7-8 forward P/E and 0.3 P/B compared to averages of 9.6 and 0.7 for the major regional banks group. However, earnings are expected to be down strongly this year from 86c in 2010 (after taking out non-recurring items), before rebounding back to 89c in 2012.
In our review of the investing activities of guru and mega funds in Q3, we found that guru funds were bearish on BAC, cutting a net $271 million in Q3 from their $1.33 billion prior quarter position, with the major sellers being Eton Park Capital Management ($143 million) and Kingdon Capital Management ($78 million). Mega funds, in contrast, were bullish on BAC, adding a net $1.53 billion to their $19.36 billion prior quarter position in the company, with the top buyers being Citigroup ($985 million), Dodge & Cox ($856 million) and Goldman Sachs ($716 million).
Research in Motion Ltd. (RIMM): RIMM is a Canadian manufacturer of BlackBerry handheld devices for the mobile communications market. The stock is expected to be very volatile today after rumors emerged that the company had hired Goldman Sachs (GS) to explore strategic options. The company, no stranger to takeover rumors, has in the past been talked about with Microsoft Corp. (MSFT) and Amazon.com Inc. (AMZN) as possible suitors, among others. The company trades at a cheap current P/E of below 4 and at almost 20% below book value.
In the most recent available Q3 filings for guru and mega fund managers, we found surprisingly that gurus collectively were on the wrong side of the trade on this one, adding a net $67 million in Q3 to their $237 million prior quarter position as the stock got cut by about 20% in Q3 and then another one-third since the end of Q3. Mega funds too added a net $32 million in Q3 to their $952 million prior quarter position in the company.
However, it is important to remember that these funds have long-term horizons stretching many years, sometimes even decades, and that the RIMM story has not played out yet. Indeed, a hefty acquisition premium could still prove them right, and if one believes in their collective wisdom, it would make a strong argument that RIMM could get bought out ultimately at a good premium to its current price.