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In this article, via an analysis (based on the latest available Q3 institutional 13-F filings) of the investing activities of the world largest fund managers managing between $100 billion and over a trillion dollars, we identify the biofuel group companies that are being accumulated and those being distributed by these mega managers. The list includes prominent managers such as Wellington Management ($1.6 trillion in total assets under management), Vanguard Group ($1.4 trillion), Fidelity Investments ($640 billion), T Rowe Price ($330 billion), and Goldman Sachs Asset Management ($580 billion), among others.

We determined based on our analysis that mega fund managers are bullish on the biofuel group, and during the September quarter, these mega fund managers together added a net $82 million to their $5.51 billion prior quarter position in the group, selling $486 million and buying $568 million worth of stocks in the group. Furthermore, overall they are under-weight in the group by a factor of 0.7; that is taken together mega funds have invested 0.11% of their capital in the biofuel group compared to the 0.15% weighting of the group in the overall market.

The following are biofuel group companies that these mega fund managers are most bullish about (see Table):

Archer Daniels Midland (NYSE:ADM): ADM is the largest ethanol producer in the U.S. However, it is mainly a processer and marketer of agricultural commodities, and it processes oilseed for the food and feed industries. Mega funds added a net $97 million in Q3 to their $4.52 billion prior quarter position, and taken together mega funds hold 23.7% of the outstanding shares, approximately at par with their 23.5% weighting in the biofuel group. The top buyers were Wellington Capital Management ($165 million), Invesco Ltd. ($145 million) and T Rowe Price ($116 million), and the top holders were Vanguard Group ($839 million) and State Street Corp. ($834 million). Overall, 658 institutions hold 68.6% of ADM shares, with State Farm Mutual Automobile Insurance Co. ($1.64 billion) being by far the top holder with 8.4% of the outstanding shares.

Amyris Inc. (NASDAQ:AMRS): AMRS sells ethanol produced by third parties under short-term agreements through a network of storage terminals. Mega funds added a net $6 million in Q3 to their $73 million prior quarter position, and taken together mega funds hold 15.4% of the outstanding shares, significantly less than their 23.5% weighting in the biofuel group. The top buyer was Fidelity Investments ($6 million), and the top holders were Fidelity ($42 million), Vanguard Group ($10 million) and Ameriprise ($8 million). Overall, 77 institutions hold 46.7% of AMRS shares, with Artis Capital Management ($51 million), Fidelity and hedge fund TPG Capital ($37 million) being the largest holders with 9.8%, 8.0% and 7.2% of the outstanding shares respectively.

Rentech Inc. (NASDAQ:RTK): RTK is engaged in the commercialization of its proprietary Rentech-SilvaGas biomass gasification process that converts multiple biomass feedstocks into synthesis gas (syngas) for the production of renewable fuels and power. Mega funds added a net $1 million in Q3 to their prior quarter $61 million position in the company, and taken together they hold 18.4% of the outstanding shares, less than their 23.5% weighting in the group but still significant given the low $1-2 price of the stock which is below the radar screen for most funds. The top buyer was Vanguard Group ($2.4 million), and the top holder is Vanguard ($20 million). Overall, 87 institutions hold 31.8% of RTK shares, with Vanguard being the largest holder with 5.8% of the outstanding shares.

Kior Inc. (NASDAQ:KIOR): KIOR is a renewable fuels company that has developed a proprietary technology to convert biomass into renewable crude oil, which is then processed into gasoline, diesel and fuel oil blendstocks. Mega funds hold a new $17 million position in KIOR at the end of Q3, and taken together mega funds hold 4.2% of the outstanding shares, significantly less than their 23.5% weighting in the biofuel group. This is understandable given that the company just completed its IPO in late June this year.

The top buyers were Wellington Capital Management ($5 million), JP Morgan Chase & Co. ($3 million), MFS Investment Management ($2 million) and Blackrock ($2 million). Overall, 47 institutions hold 48.8% of KIOR shares, with Artis Capital Management ($140 million) being by far the largest holder with 34.9% of the outstanding shares.

Pacific Ethanol Inc. (NASDAQ:PEIX): PEIX is among the largest producers of ethanol in North America. It is engaged in the production, transportation, storage and sale of ethanol and wet distillers' grain in the western U.S. PEIX is noticeably absent from the holdings of most of the 30+ mega funds that we track, most likely because of the low sub-$1 price it has traded at until recently, and probably not a reflection on the perceived value in PEIX. Goldman and Vanguard are the only ones with a position in the company, at $0.4 and $0.2 million respectively. Overall, 33 institutions hold 2.3% of PEIX shares, with Hudson Bay Capital Management ($0.8 million) being the top holder with 0.8% of the outstanding shares.

The following are biofuel group companies that these mega fund managers are most bearish about (see Table):

Green Plains Renewable Energy (NASDAQ:GPRE): GPRE is among the top five ethanol producers in North America, operating six ethanol plants in IN, IA, NE, and TN. Mega funds cut a net $8 million in Q3 from their $75 million prior quarter position in GPRE, and taken together they hold 16.9% of the outstanding shares, significantly less than their 23.5% weighting in the biofuel group. The top seller was Goldman Sachs ($14 million). Overall, 79 institutions hold 42.8% of GPRE shares, with Wellington Capital Management ($24 million) being the largest holder with 6.6% of the outstanding shares.

Biofuel Energy Corp. (NASDAQ:BIOF): BIOF is a holding company engaged in the production and sale of ethanol and distillers' grain in NE and MN, and it is among the largest producers of ethanol in North America. Just like in the case of PEIX above, BIOF is noticeably absent from the holdings of most of the 30+ mega funds that we track, most likely because of the low sub-$1 price it trades at currently, and probably not a reflection on the perceived value in the company. Wells Fargo & Co. is the only with a significant position in the company, at $2.0 million. Overall, 19 institutions hold 35.8% of BIOF shares, with Greenlight Capital ($17 million) and Third Point LLC ($4 million) being the top holders with 26.1% and 5.4% of the outstanding shares respectively.

RexAmerican Resources (NYSE:REX): REX holds interests in five ethanol entities located in IL, SD, TX and IA. Mega funds cut a net $10 million in Q3 from their $58 million prior quarter position in REX, and taken together they hold 22.6% of the outstanding shares, slightly less than their 23.5% weighting in the biofuel group. The top seller was Fidelity Investments ($10 million), and top holder is also Fidelity ($16 million). Overall, 62 institutions hold 55.5% of REX shares, with Dimensional Fund Advisors ($20 million) and Fidelity being the largest holders with 10.4% and 8.5% of the outstanding shares respectively.

Covanta Holding Corp. (NYSE:CVA): CVA develops and operates infrastructure for the conversion of waste-to-energy and independent power production worldwide. Mega funds cut a net $19 million in Q3 from their $593 million prior quarter position in CVA. However, taken together they hold 28.7% of the outstanding shares, greater than their 23.5% weighting in the biofuel group. The top sellers were Neuberger Berman Group ($15 million) and Deutsche Bank AG ($6 million). Overall, 192 institutions hold 79.9% of CVA shares, with Morgan Stanley ($177 million), Neuberger Berman ($143 million), and Third Avenue Management ($129 million) being by far the largest holder with 9.2%, 7.4% and 6.7% of the outstanding shares respectively.

Table

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General Methodology and Background Information: The latest available institutional 13-F filings of over 30+ mega hedge fund and mutual fund managers were analyzed to determine their capital allocation among different industry groupings, and to determine their favorite picks and pans in each group. These mega fund managers number less than one percent of all funds and yet they control almost half of the U.S. equity discretionary fund assets. The argument is that mega institutional investors have the resources and the access to information, knowledge and expertise to conduct extensive due diligence in informing their investment decisions. When mega Institutional Investors invest and maybe even converge on a specific investment idea, the idea deserves consideration for further investigation. The savvy investor may then leverage this information either as a starting point to conduct his own due diligence.

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.

Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our 'opinions' and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.

Source: Top Biofuel Energy Picks From The World's Largest Money Managers