Analysis Of Monday And Tuesday's Noteworthy Institutional 5% Ownership Filings

by: GuruFundPicks

Many leading funds filed forms 13-D and 13-G (and form 4) with the SEC on Monday and Tuesday, including First Eagle Investment Management, SAC Capital Advisors, and Massachusetts Financial Services, indicating that they had amended their ownership in U.S. traded public companies. 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 on Monday and part-of-the-day on Tuesday (for more info on Forms 13-D and 13-G, and how to interpret that, please refer to the end of this article):

American Eagle Outfitters (NYSE:AEO): AEO is an apparel and accessories retailer that operates over a thousand American Eagle Outfitters, Aerie standalone, and 77Kids stores in the U.S. and Canada. On Monday, Stamford, CT-based SAC Capital Advisors, led by legendary hedge fund manager Steven Cohen, and with $12.5 billion in 13-F assets per its latest Q3 filing, filed SEC Form SC 13G indicating that it holds 9.4 million or 4.9% of outstanding shares, a huge increase from the 0.8 million shares SAC indicated that it held at the end of Q3. AEO gave poor Q4 (January) earnings guidance (33c-35c v/s 40c-44c) at the beginning of the year, on January 5th. The stock gapped down over 17%, and has been consolidation since then, trading at a discount 13-14 forward P/E and 2.0 P/B compared to averages of 16.3 and 3.1 for its peers in the apparel and shoe retail group, while earnings are projected to rise modestly from $1.02 in 2011 to $1.06 in 2013.

Polypore International (NYSE:PPO): PPO is a technology filtration company that develops, manufactures, and markets micro-porous membranes used in the separation and filtration processes. It operates in two market segments, Energy Storage and Separations Media. On Monday, Chicago-based William Blair & Co., with $35.7 billion in 13-F assets per its latest Q3 filing, filed SEC Form SC 13G indicating that it holds 3.5 million or 7.6% of outstanding shares, more than double the 1.7 million shares it indicated that it held at the end of Q3. PPO trades at 16 forward P/E and 5.4 P/B compared to averages of 15.2 and 1.6 for the electronics miscellaneous components group.

Microchip Technology Inc. (NASDAQ:MCHP): MCHP manufactures microcontrollers, application-specific standard products, and related mixed-signal and memory products for the consumer, automotive, office automation, communications and industrial markets. On Tuesday, Boston-based Massachusetts Financial Services, with over $80 billion in 13-F assets per their latest Q3 filing, filed SEC Form SC 13G indicating that it holds 13.6 million or 7.1% of outstanding shares, an increase from the 12.6 million shares that it indicated it held at the end of Q3. MCHP trades at 18-19 forward P/E and 3.7 P/B compared to averages of 31.8 and 2.1 for its peers in the analog & mixed semiconductor group.

Pinnacle Airlines Corp. (PNCL): PNCL is an independent regional airline service provider, flying as Continental Express, Delta Connection, United Express and US Airways Express, with more than 1,500 daily flights to over 180 cities and towns in the U.S., Canada, Mexico and Belize. On Tuesday, NY-based Meson Capital Partners, along with Summit, NJ-based private investor Wayne King, filed SEC Form SC 13D indicating that together they hold 1.01 million or 5.3% of outstanding shares, an increase from the 0.53 million shares that Mr. King indicated holding in an earlier SEC filing on December 23rd of last year. Of the 1.01 million shares, Mr. King directly owns 0.6 million shares, and the remaining 0.41 million are owned by Meson Capital Management.

Curis Inc. (NASDAQ:CRIS): CRIS is a development stage biotech company focused on the development of targeted cancer therapies that modulate signaling pathways controlling the repair and regeneration of tissues. On Monday, New-York based investment management firm First Eagle Investment Management, adviser to the First Eagle series of Mutual Funds and with $20.1 billion in 13-F assets per its latest Q3 filing, filed SEC Form SC 13G/A indicating that it holds 17.5 million or 22.8% of outstanding shares, a decrease from the 17.8 million it indicated it held at the end of Q3. CRIS shares have been extremely volatile this week after news earlier this week, on Monday mid-morning, that the FDA approved the company's Erivedge Capsule as first treatment for advanced basal cell carcinoma. Its shares first spiked up to a high of $5.65 on the news, and then collapsed to a low of $4.62 in the next half hour. A number of brokers, including Brean Murray and Summer Street Research, have come out in support of the stock, raising their targets to the $6-$7 range, but shares continue to languish in the $5 range, below where the stock traded at before the FDA approval was announced.

General Discussion

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.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Credit: Fundamental data in this article were based on SEC filings, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and The information and data is believed to be accurate, but no guarantees or representations are made.

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