Analysis Of Monday's Noteworthy Institutional 5% Ownership Filings In The Tech Sector

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Includes: CIEN, CREE, TUDO, YHOO, YOKU
by: GuruFundPicks

Many leading funds, including Fidelity Investments, Janus Capital, and Third Point, filed forms 13-D and 13-G (and form 4) with the SEC on Monday, March 12th, indicating that they had amended their ownership in U.S. traded public companies operating in the tech sector. The following are the most notable institutional trades based on our analysis of those filings (for more info on Forms 13-D and 13-G, and how to interpret that, please refer to the end of this article):

Youku.com Inc. (NYSE:YOKU): YOKU, China's largest video-streaming company, is more popularly known as the YouTube of China. But in reality, it is more a combination of Netflix and YouTube; Netflix, because it offers mostly professionally-generated content licensed from movie studios and TV companies, and YouTube due to its reliance on advertising as a main source of revenue.

On Monday, Denver, CO-based mutual fund powerhouse Janus Capital Management, with $86.0 billion in 13-F assets at the end of Q4, filed SEC Form SC 13G/A indicating that it holds 8.8 million shares of YOKU, an increase of 1.5 million shares from 7.3 million shares it held at the end of Q4; Janus has been gradually building a large position in YOKU, from 0.9 million shares it held at the end of Q2 to 4.2 million shares at the end of Q3.

Janus' large bet on YOKU has paid off big, as the stock was Monday's best mover, up 27.3% for the day, and up about 100% YTD. The surge Monday was on the company's announcement that they had signed a definitive agreement to combine with Tudou Holdings (NASDAQ:TUDO), an online video company in China that allows users to upload, share, watch, rate and comment on videos, in a 100% stock-for-stock transaction; the combined company will continue to be listed on the NYSE under the symbol YOKU.

The combination is being heralded as a game changer for the Chinese online video market, with Beijing-based research firm T.H. Capital predicting that the deal would change it from a content-centric to a distribution-centric market, so that eventually content providers may have to pay for distribution.

Moreover, post-merger, the new YOKU will strengthen its leadership, gaining the dominant market share, and well ahead of peers Sohu.com (NASDAQ:SOHU), a leading Chinese internet portal, and Baidu Inc. (NASDAQ:BIDU), a leading Chinese provider of internet search, targeted online advertising and other internet content services. YOKU shares currently trade 5.4 P/B and at 31.0 PSR versus averages of 1.7 and 3.3 for its peers in the internet content group.

Yahoo! Inc. (NASDAQ:YHOO): YHOO is a leading global internet search engine, eCommerce and media company. On Monday, Guru Daniel Loeb's event-driven hedge fund Third Point LLC, with $2.5 billion in 13-F assets per its latest Q4 filing, filed SEC Form SC 13D/A revealing that it purchased another 250,000 shares for $3.7 million, and now holds 70.5 million or 5.8% of outstanding shares.

Third Point has been aggressively adding to its YHOO position, as we reported in a prior article two weeks ago, when it reported adding 14.3 million shares to its 56 million share Q4 position. Third Point initiated its YHOO position with a 48 million share new buy in Q3 of 2011, and added another 8 million shares in Q4. With the latest buy, Third Point is now the largest institutional holder of YHOO, slightly ahead of mega fund Capital Research Global Investors that also holds 70.5 million shares. Also, in the filing, Third Point announced its intention to nominate, each of Daniel Loeb, Harry Wilson, Michael Wolf, and Jeffrey Zucker to stand for election as Directors of YHOO for terms expiring in 2013.

YHOO has been in the news this week over a patent infringement lawsuit that it filed against Facebook (NASDAQ:FB) in federal court, a move that has met with skepticism by much of the investment community. Its shares have traded down to flat since peaking in early 2006, as earnings growth has been sluggish and the company has continued losing its search market share to Google Inc. (NASDAQ:GOOG). YHOO shares currently trade at 15-16 forward P/E and 1.4 P/B compared to averages of 27.2 and 3.3 for its peers in the internet services group.

Ciena Corp. (NASDAQ:CIEN): CIEN is a designer of Ethernet transport and switching systems used in network infrastructure by telecom and cable service providers. On Monday, Fidelity Investments filed SEC Form SC 13G/A indicating that it holds 1.18 million or 1.2% of outstanding shares, well below the 6.0 million shares that it held at the end of Q4, and thereby ceasing to be a 5% holder of CIEN shares.

CIEN shares, down about 45% in 2011, have staged a strong rally since the beginning of the year, up about 30% YTD, powered by expectations of higher revenue and profits based on the company's strong market position in the fast-growing 40G and 100G segments of the optical transport market. Its shares currently trade at 18-19 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 2011 to 86c in profits in 2013.

Cree Inc. (NASDAQ:CREE): CREE is a manufacturer of light emitting diodes (NASDAQ:LEDS), LED lighting, and semiconductor solutions for wireless and power applications. Its LED products include blue and green LED chips that are used in various applications, including video screens, gaming displays and automotive backlighting. On Monday, Fidelity Investments filed SEC Form SC 13G/A indicating that it holds 13.2 million or 11.3% of outstanding shares, an increase from the 8.8 million shares it held at the end of Q4. CREE trades at a current 17.1 P/E and 1.3 P/B compared to averages of 14.9 and 1.2 for its peers in the discrete semiconductors group.

Credit: Fundamental data in this article were based on SEC filings, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.

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

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