Many leading funds, including Fidelity Investments, T Rowe Price, and Blackrock, filed forms 13-D and 13-G (and form 4) with the SEC last week (May 7 to May 11, 2012), indicating that they had amended their ownership in U.S.-traded public companies. Based on our analysis, the following are two of the most noteworthy filings in the tech sector (check out two prior articles discussing last week's institutional 5% ownership filings in the basic materials and energy group and the telecom group) in which institutions sold stocks in companies in the group that were plunging lower (for more info on Forms 13-D and 13-G and how to interpret them, please refer to the end of this article):
Ctrip.com International (CTRP): Ctrip is a China-based consolidator of hotel accommodations, airline tickets, and packaged tours targeting individual business and leisure travelers in China. On Thursday, mega fund T Rowe Price Associates, with $288 billion in 13-F assets, filed SEC form SC 13G/A indicating that it holds 0.9 million shares, thereby almost selling completely out of the 16.7 million share position it held at the end of Q4. Before the sale, T Rowe Price was the largest institutional holder of Ctrip.
Ctrip is expected to release its Q1 (March) this week, on Wednesday, after the close of market. In the latest Q4, it reported in-line revenues and earnings. Its shares, however, have been weak since the report, dipping to multiyear lows and now off about 20% YTD. The shares currently trade at 15-16 forward P/E and 2.5 P/B compared to averages of 70.5 and 5.4 for its peers in the Internet commerce group. We reiterate our earlier belief that with the growth of the Chinese travel market behind it, Ctrip seems like an attractive play, but we would wait on the sidelines until margin growth is resumed.
Avago Technologies (AVGO): Avago is a Singaporean designer of analog ICs for telecom, industrial, automotive, and computing markets. On Wednesday, mega fund Blackrock, 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 10.4 million or 4.3% of outstanding shares, a decrease from the 15.3 million shares it held at the end of Q4.
Avago is expected to release its Q2 (April) earnings next week, on Tuesday, after the close of market. In the latest Q1, it beat revenues and earnings estimates (62 cents vs. 58 cents), and issued in-line guidance for Q2. Its shares were initially up following the report, riding to highs, but have been down steeply in the last six weeks in concert with the weakness in the semiconductor group. The shares are now off 20% from the highs last months, and they trade at 10-11 forward P/E and 3.7 P/B compared to averages of 22.7 and 2.1, respectively, for its peers in the electronic components semiconductor group.
Additional major insider filings last week in the tech sector include:
- KLA Tencor (KLAC), a provider of process control and yield management solutions for the semiconductor, LED, nano-electronics, data storage and solar market, in which mutual fund powerhouse Fidelity Investments, with $492 billion in 13-F assets, filed SEC form SC 13G/A indicating that it holds 6.0 million or 3.6% of outstanding shares, a decrease from the 14.5 million shares it held at the end of Q4;
- 3D graphics processor designer and developer Nvidia (NVDA), in which Pasadena, Calif.-based mega fund Primecap Management, with $62.7 billion in 13-F assets, filed SEC form SC 13G/A indicated that it holds 27.7 million or 4.5% of outstanding shares, a decrease from the 36.8 million shares it held at the end of Q4; and
- Zynga (ZNGA), which develops, markets and operates online social games, making them available worldwide on various platforms, including Facebook, Myspace and Yahoo, as well as the iPad, iPhone and Android devices. Morgan Stanley filed SEC form SC 13G/A indicating that it holds 32.0 million shares of Zynga, a decrease from the 32.8 million shares it held at the end of Q4.
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. Additionally, 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.
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