5% Fund Ownership Filings In Basic Materials And Energy: 1 Growth Company Bought, 1 Sold And 5 Others

by: GuruFundPicks

Many leading funds, including SAC Capital, Paulson & Co. and Blackrock Inc., filed forms 13-D and 13-G (and form 4) with the SEC last week (May 7th to 11th, 2012), indicating that they had amended their ownership in U.S. traded public companies. The following are two of the most noteworthy institutional trades based on our analysis of those filings, both high growth companies operating in the basic materials and energy sectors, with one in which a major institution accumulated shares and the other in which another major institution distributed shares (for more info on Forms 13-D and 13-G, and how to interpret that, please refer to the end of this article):

Cabot Oil and Gas Corp. (NYSE:COG): COG is engaged in the exploration and production of oil and gas in Rocky Mountain and Appalachian areas and in the Andarko Basin in TX and LA, with 96% of its reserves and 95% of its current production being natural gas. On Thursday, mega fund Neuberger Berman, with $200 billion in assets under management, filed SEC Form SC 13G/A indicating that it holds 21.4 million or 10.2% of outstanding shares, an increase from the 7.8 million shares it reported holding at the end Q4 (the latest filing to-date). The accumulation of shares keeps it as the largest institutional holder of COG, but now well ahead of second-place, mutual fund powerhouse, Fidelity Investments, that owned 5.9 million shares at the end Q4.

COG reported its Q1 (March) at the end of April, with earnings in-line, but at 14c, they were up 40% YoY (year-over-year), with revenues for the quarter also being up 30% YoY. Looking forward, COG revenues and earnings are projected by analysts to increase from $980 million and 67c in 2011 to $1.63 billion and 88c in 2013, a 14.6% and 29.0% annual rate of increase in revenues and earnings respectively. The stock currently trades at 40-41 forward P/E and 3.5 P/B compared to averages of 15.2 and 5.2 for its peers in the U.S. oil and gas exploration and production group.

Sandridge Energy Inc. (NYSE:SD): SD is an OK-based independent oil and natural gas company, with primary areas of focus being West Texas, the Cotton Valley Trend in East Texas and the Gulf Coast. On Wednesday, mega fund Blackrock Inc., the world's largest and most prominent asset manager, with over $3.5 trillion in assets under management, filed SEC Form SC 13G/A indicating that it holds 17.4 million or 4.2% of outstanding shares, a decrease from the 22.3 million shares it held at the end of Q4. Even with the distribution, Blackrock still remains the second largest institutional holder of SD, behind Thornburg Investment Management.

SD reported its Q1 (March) the week before last, on Thursday, beating analyst revenue and earnings estimates (4c v/s 2c), with revenues 22% higher YoY. Moreover, analysts are projecting that SD will continue growth revenue and earnings, with revenues projected to increase from $1.42 billion in 2011 to $2.60 billion in 2013, at an rate of increase of 35.3%, and earnings are projected to go from 13c loss in 2011 to a 35c profit in 2013. Its shares, however, have trended lower after the report, along with the rest of the energy complex, and currently trade at 19-20 forward P/E and 1.9 P/B compared to averages of 13.7 and 5.2 for its peers in the U.S. oil and gas exploration and production group.

Other major institutional filings last week in the basic materials and energy sectors included:

  • Cameco Corp. (NYSE:CCJ): CCJ is a Canadian company that is engaged in the exploration, refining and conversion of uranium in the U.S., Canada and Kazakhstan, in which global equity investment firm Tradewinds Global Investors filed SEC Form SC 13G/A indicating that it holds 32.4 million or 8.2% of outstanding shares, a significant decrease from the 56.7 million shares it held at the end of Q4;
  • Novagold Resources Inc. (NYSEMKT:NG), that is a Canadian company engaged in the exploration and development of gold, silver and copper in Alaska and British Columbia, in which famed hedge fund company Paulson and Co., with over $35 billion in assets under management, filed SEC Form SC 13G/A indicating that it holds 36.0 million or 12.9% of outstanding shares, an increase from 23.0 million shares it held at the end of Q4;
  • Ultra Petroleum Corp. (UPL), that is an independent, exploration and production company focused on developing its long life, tight-gas sand resource play in the Green River Basin in WY, with current production comprising 97% gas and 3% crude oil or liquid hydrocarbons, and about 96% of its proved reserves is natural gas, in which Chicago-based Harris Associates LP, manager of the Oakmark Funds, with $55 billion in 13-F assets, filed SEC Form SC 13G/A indicating that it holds 0.5 million shares, thereby almost selling out of the 10.8 million share position it held at the end of Q4;
  • Western Refining Inc. (NYSE:WNR), that refines and markets crude oil and refined products in West TX, AZ, NM, UT, CO and the mid-Atlantic region, in which billionaire star fund manager Stephen Cohen's hedge fund SAC Capital Advisors, with over $15.7 billion in 13-F assets, filed SEC Form SC 13G indicating that it holds 4.9 million or 5.4% of outstanding shares, an increase from the 1.3 million shares it held at the end of Q4; and
  • Chesapeake Energy (NYSE:CHK), an independent oil and gas company, with its primary operating assets in mid-continent region of Oklahoma, western Arkansas, southwestern Kansas and the Texas panhandle, in which value guru Mason Hawkins' Southeastern Asset Management, that manages the Longleaf Partners Funds, filed SEC Form SC 13D/A indicating that it holds 89.9 million or 13.6% of outstanding shares, an increase from the 87.4 million shares it held at the end of Q4.

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 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 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 and company descriptions are based on SEC filings, Zacks Investment Research, Yahoo, 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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