Many leading funds, including Capital Research Global Investors, Carl Icahn and Wellington Management, filed forms 13-D and 13-G (and form 4) with the SEC this week, on Monday to Wednesday, indicating that they had amended their ownership in U.S. traded public companies operating in the technology 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):
Sprint Nextel Corp. (S): Sprint offers wireless and wireline communications products and services to individual consumers, businesses, government subscribers and resellers in the United States, Puerto Rico and the U.S. Virgin Islands. On Tuesday, Los Angeles-based mega fund Capital Research Global Investors, with over $223 billion in 13-F assets, filed SEC Form SC 13G/A indicating that it holds 320.0 million shares, an increase from the 277.0 million shares it held at the end of Q4. The buy further solidifies its position as the largest institutional holder of Sprint shares.
Sprint shares are currently languishing near multi-year lows after a disastrous 2011 in which shares were further cut by 55%, on top of crippling losses earlier in the decade in 2006-08 when shares lost 80% of their value. The company has been losing money, in contrast to peers AT&T Inc. (T) and Verizon Communications (VZ), both of which are profitable. It currently trades at 0.7 P/B and 0.24 PSR (price-to-sales ratio); in comparison, its peers in the diversified communications group, AT&T trades at 1.7 P/B and 1.4 PSR, and VZ trades at 2.9 P/B and 0.9 PSR.
Brocade Communications Systems Inc. (BRCD): BRCD is a network solutions provider that helps organizations worldwide transition smoothly to a virtualized world where applications as information can reside anywhere, by providing data center networking and storage area networking solutions. On Wednesday, New York-based Elliott Associates with $2.9 billion in 13-F assets, filed SEC Form SC 13D/A indicating that it holds 38.8 million or 8.4% of outstanding shares, a decrease from the 43.7 million shares it held at the end of Q4. This makes it the third largest institutional holder of BRCD shares, behind Franklin Resources and Fidelity Investments with 54.0 million and 43.7 million shares, respectively.
BRCD reported a solid Q4 six weeks ago, beating analyst earnings (20c v/s 13c) and revenue estimates ($561 million vs. $542 million). However, it guided revenues and earnings lower for Q2 (April). Its shares as a result have been flat since the report, and they currently trade at 9-10 forward P/E and 1.2 P/B compared to averages of 24.9 and 2.4 for its peers in the computer networks group.
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, Wellington Management filed SEC Form SC13G/A indicating that it holds 9.2 million or 13.6% of outstanding shares, an increase from the 4.1 million shares it held at the end of Q4, thereby making it the largest institutional holder of APKT. Acme's shares have 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 3.7 P/B compared to averages of 18.0 and 1.5 for its peers in the communications infrastructure group.
Other major institutional filings this week in the technology sector included:
- AOL Inc. (AOL), that provides online content and services to consumers, publishers and advertisers, in which New York-based investment adviser Starboard Value LP, that is focused on opportunities in small-cap space, primarily in the tech sector, filed SEC Form SC 13D/A indicating that it holds 4.9 million shares, an increase from the 4.4 million shares it held at the end of Q4;
- Capstone Turbine Corp. (CPST), that manufactures micro-turbine generators with cogeneration, resource recovery and secure power applications, in which New York-based Gilder Gagnon Howe & Co. filed SEC Form SC 13G/A indicating that it holds 16.8 million shares, a decrease from the 30.4 million shares it held at the end of Q4;
- Cypress Semiconductor Corp. (CY), a designer, developer, manufacturer and marketer of mixed-signal and programmable solutions for data communications, telecommunications, computers, and instrumentation markets worldwide, in which New York-based Bank of New York Mellon Corp., with over $1.2 trillion in assets under management, filed SEC Form SC 13G/A indicating that it hold 4.1 million shares, a decrease from the 10.0 million shares it held at the end of Q4;
- Rentech Inc. (RTK), 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, in which CA-based hedge fund Park West Asset Management filed SEC Form SC 13G indicating that it held 11.3 million shares, an increase from the 10.3 million shares it held at the end of Q4;
- SK Telecom Co Ltd. ADS (SKM), a South Korean provider of digital wireless voice and data services, in which Los Angeles-based international-focused investment management firm Tradewinds Global Investors filed SEC Form SC 13G/A indicating that it holds 3.8 million shares, a decrease from the 40.9 million shares it held at the end of Q4;
- Rackspace Hosting Inc. (RAX), a world leader and specialist in hosting and cloud computing, offering computing-as-a-service, including various types of managed hosting services, to SMEs as well as large enterprises worldwide, in which Fidelity Investments filed SEC Form SC 13G/A indicating that it holds 10.2 million shares, a decrease from the 17.1 million shares it held at the end of Q4;
- Lam Research Corp. (LRCX), that designs, manufactures, refurbishes and services semiconductor processing equipments used in the fabrication of integrated circuits, and is a market leader in plasma etch and a leading supplier of single-wafer clean products, in which JP Morgan Chase & Co. filed SEC Form SC 13G/A indicating that it holds 14.2 million shares, an increase from the 11.4 million shares it held at the end of Q4;
- Healthcare related content provider WebMD Health Corp. (WBMD), in which Carl Icahn filed SEC Form SC 13D/A indicating that he holds 6.7 million shares, an increase from the 5.7 million shares he held at the end of Q4;
- Micrel Inc. (MCRL), a manufacturer of analog, mixed-signal and digital ICs used in wireless handsets, computers, TVs and networking equipment in North America, Europe and Asia, in which London Co. of Virginia filed SEC Form SC 13G/A indicating that it holds 6.4 million shares, an increase from the 5.3 million shares it held at the end of Q4;
- OPNET Technologies Inc. (OPNT), a provider of predictive network management software solutions to optimize performance and maximize availability of communications networks and networked applications, in which Blackrock Inc. filed SEC Form SC 13G/A indicating that it hold 1.1 million shares; and
- Powerwave Technologies Inc. (PWAV), a manufacturer of antennas, boosters, combiners, cabinets, shelter and filters for wireless telecom networks worldwide, in which Blackrock Inc. filed SEC Form SC 13G indicating that it holds 5.0 million shares.
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 10 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 18 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 indicate 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, 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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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.