Many leading funds, including Vanguard Group, Capital Research Global Investors and RS Investment 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 (other articles focused on the institutional ownership filings this week in the healthcare, technology, and basic materials & energy sectors can be accessed by clicking on the above hyperlinks). 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):
Gamestop Corp. (GME): GME is a retailer of video game products and personal computer (PC) entertainment software. On Tuesday, San Francisco, CA-based mutual fund company RS Investment Management, with $10.5 billion in 13-F assets at the end of Q4, filed SEC Form SC 13G/A indicating that it holds 14.1 million shares, an increase from the 10.6 million shares it held at the end of Q4, keeping it the second largest institutional holder of GME shares after Fidelity Investments that holds 17.8 million shares.
GME shares have been under assault lately by bears betting that the company's business model will become marginalized by the digital revolution, and suffer the same fate as Blockbuster Video. While there are legitimate comparisons to be made here, GME however has strong fundamentals in terms of a cheap valuation and a strong balance sheet with no-debt, and also it has short-term flexible leases for its stores, all of which give it greater operational flexibility to make the course corrections needed to meet the challenge. GME shares currently trade at 6-7 forward P/E and 1.0 P/B compared to averages of 9.9 and 1.1 for its peers in the consumer electronics retail group.
Equity Residential (EQR): EQR is a REIT engaged in acquiring, developing, owning and managing multi-family properties located in the U.S. On Tuesday, Vanguard Group filed SEC Form SC 13G/A indicating that it holds 30.7 million shares, an increase from the 28.1 million shares it held at the end of Q3. EQR reported an in-line Q4 in early February, and it trades at forward price to funds from operations (P/FFO) ratio of 20.1 compared to the average of 17.9 for its peers in the REIT Equity Trust group. Also, it has a dividend yield of 2.3% compared to the 3.5% average for the group.
Besides EQR, Vanguard also filed SC 13G's for the following other REITs:
- HCP Inc. (HCP), a REIT that invests in healthcare-related real estate located throughout the U.S., including long-term care facilities, congregate care and assisted living facilities, acute care and rehabilitation hospitals, medical office buildings, physician group practice clinics, and psychiatric facilities, in which it holds 42.3 million shares, an increase from the 38.8 million shares it held at the end of Q4;
- Realty Income Corp. (O), engaged in the acquisition and ownership of commercial retail real estate properties in the U.S., in which it holds 13.9 million shares, an increase from the 12.7 million shares it held at the end of Q4;
- Piedmont Office Realty Trust Inc. (PDM), engaged in the acquisition and ownership of commercial real estate properties in the U.S., in which it holds 18.0 million shares, an increase from the 16.5 million shares it held at the end of Q4;
- Prologis Inc. (PLD), a REIT that acquires, develops and operates industrial properties in North America, Europe and Asia, in which it holds 47.3 million shares, an increase from the 43.5 million shares it held at the end of Q4;
- Simon Property Group Inc. (SPG), a REIT that owns, operates and develops regional malls, outlets and shopping centers, in which it holds 31.2 million shares, an increase from the 28.4 million shares it held at the end of Q4;
- UDR Inc. (UDR), that operates as a self-administered equity REIT that owns, acquires, renovates, develops and manages middle-market apartment communities, in which it holds 22.8 million shares, an increase from the 21.0 million shares it held at the end of Q4; and
- healthcare REIT Ventas Inc. (VTR), in which it holds 30.0 million shares, an increase from the 26.5 million shares it held at the end of Q4.
Zynga Inc (ZNGA): ZNGA develops, markets and operates online social games such as CityVille, FarmVille, FrontierVille and others, making them available worldwide on various platforms, including Facebook, MySpace and Yahoo, as well as the iPad, iPhone and Android devices. 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 16.5 million shares, a new position for it since the end of Q4.
ZNGA shares were weak in the weeks following the IPO, but have ratcheted up recently as we get close to an IPO of Facebook (FB) at a valuation of near $100 billion. The company accounts for 12% of Facebook revenue, and the argument among bulls has been that the market is not valuing it rich enough in comparison to Facebook. We believe that with the recent sharp rise in ZNGA shares, the risk is to the downside; although the valuation could be justified based on comparison to FB valuation, buying based on such comparisons as many learnt in the late 90s and the early part of the last decade is dangerous. We believe that it is actually more likely that both FB and ZNGA are overvalued based on fundamentals, and that the bubble could easily be deflated after the initial hype from the Facebook IPO subsides.
Other major institutional filings this week included:
- Beazer Homes USA Inc. (BZH), that builds single-family and multi-family homes in the west, southeast, east and other regions of the U.S. spanning 15 states, in which Deutsche Bank AG filed SEC Form SC 13G/A indicating that it holds 2.7 million shares, a decrease from the 5.0 million shares it held at the end of Q4;
- Computer Sciences Corp. (CSC), that provides IT, business process outsourcing and professional services to enterprises and the U.S. government, in which Los Angeles-based international-focused investment management firm Tradewinds Global Investors filed SEC Form SC 13G/A indicating that it holds 7.3 million shares, a decrease from the 11.9 million shares it held at the end of Q4;
- Hartford Financial Services Group (HIG), that offers individual and group life, group disability and property and casualty insurance products, primarily in the U.S., in which Los Angeles-based NWQ Investment Management, with over $15 billion in 13-F assets, filed SEC Form SC 13G/A indicating that it holds 21.5 million shares, a decrease from the 25.3 million shares it held at the end of Q4;
- Smith & Wesson Holding Corp. (SWHC), the world's leading producer of quality handguns, law enforcement products, firearm safety and security products, in which Topeka, Kansas-based Security Investors filed SEC Form SC 13G/A indicating that it holds 1.0 million shares, a decrease from the 5.0 million shares it indicated holding in an earlier SC 13G filing at the end of January;
- Fastenal Co. (FAST), a wholesaler and retailer of industrial and construction supplies sold through 2,566 stores in the U.S., Canada, Mexico, the Dominican Republic, Puerto Rico, Singapore and China, in which Bank of New York Mellon Corp. filed SEC Form SC 13G/A indicating that it holds 14.6 million shares, a decrease from the 15.1 million shares it held at the end of Q4;
- Teekay Tankers Ltd. (TNK), a Marshall Islands corporation formed to provide international marine transportation of crude oil, in which Los Angeles-based Kayne Anderson Capital Advisors, that manages over $15.2 billion in investments, including $8.25 billion in 13-F assets, filed SEC Form SC 13G/A indicating that it sold completely out of its 6.3 million shares position it held at the end of Q4;
- Regions Financial Corp. (RF), a holding company for Regions Bank that provides a range of commercial, retail and mortgage banking services in the U.S. via 1,772 offices in 16 states in the South and the Midwest, in which Blackrock Inc. filed SEC Form SC 13G/A indicating that it holds 70.5 million shares; and
- US Airways Group Inc. (LCC), in which Blackrock Inc. filed SEC Form SC 13G/A indicating that it holds 8.1 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 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.
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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