Many leading funds, including Carl Icahn, GAMCO Investors, and T Rowe Price, filed forms 13-D and 13-G (and form 4) with the SEC last week (June 4nd to 8th, 2012), indicating that they had amended their ownership in U.S. traded public companies. The following summarizes four noteworthy buys and two sells in the consumer, retail and financial sectors (in addition to those discussed in prior articles focused on last week's 13D/G filings in the basic materials and energy, and healthcare & tech sectors). Also, for more info on Forms 13-D and 13-G, and how to interpret them, please refer to our instablog discussion on institutional trades:
Netflix (NASDAQ:NFLX): NFLX is a provider of subscription-based Internet services for watching online movies and TV shows in the U.S. and internationally via Netflix.com, and for subscribers in the U.S. it also has a service to deliver DVDs and Blu-ray discs to their homes. On Friday, T Rowe Price Associates filed SEC Form SC 13G/A indicating that it holds 6.1 million or 10.9% of outstanding shares, an increase from the 5.1 million shares it held at the end of Q1, thereby retaining its position as the largest institutional holder of NFLX shares. Overall, too, all funds taken together accumulated NFLX shares in Q1, adding a net 0.3 million shares to their 46.2 million share prior quarter position in the company.
NFLX shares have been among the biggest high-profile plungers, down about 78% from the all-time highs in July of last year, and also cut almost in half over the last three months. In its most recent Q1 (March) reported at the end of April, revenues came in-line and earnings beat analyst estimates (8-cent loss vs. 27-cent loss). But it was the Q2 guidance that spooked investors, as the company projected lower domestic streaming subscribers than was estimated by the Street (200,000 to 400,000 vs. $1.2 million), raising doubts about the size of the market and the company's long-term growth trajectory. Also, international subscriber projections were underwhelming.
Furthermore, the company faces a myriad of challenges including heated competition from retailers such as Wal-Mart (NYSE:WMT), from cable operators, from other online sites such as Hulu.com, and from industry stalwarts such as Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG), and Apple (NASDAQ:AAPL). Moreover, the company's DVD-by-mail business is declining, and the content acquisition costs for its streaming business are expected to ride up going forward. The stock as a result has dropped, now down about 35% since the report, trading at 30-31 forward P/E, while earnings are projected to fall going forward from $4.16 in 2011 to 8 cents in 2012 and then rebounding to $2.16 in 2013.
At this point, it is mostly a wait-and-see game, as there is a wide range in analyst estimates for FY 2013, ranging from about break-even to over $3.00, so the $2.16 mean analyst estimate in this case doesn't really tell the whole story. Depending on your position, there is a high risk or opportunity, based solely on how quickly the company can ramp up its international business to profitability, or at least lower losses.
In addition to NFLX, institutions also indicated via their 13D/G filings last week that they accumulated shares in the following two consumer sector companies, both of which also have seen plunging stock prices recently (like NFLX):
- Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR), probably most famous for its patented single-cup coffee and tea brewing systems for offices and homes sold under the Keurig brand name, distributes approximately 200 whole bean and ground coffee selections, cocoa, teas and coffees, in which Los Angeles-based 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 or 10.6% of outstanding shares, an increase from the 13.9 million shares it held at the end of Q1.
- Navistar International Corp. (NYSE:NAV), that is a manufacturer of commercial and military trucks, buses, diesel engines and recreational vehicles, serving the government, construction, energy and commercial transportation markets, in which well-known financier, corporate raider and 'activist' hedge fund manager Carl Icahn's eponymous fund, and New York-based GAMCO Investors, headed by award winning money manager Mario Gabelli, and with $12.6 billion in 13-F assets at the end of Q4, both filed SEC Forms SC 13D/A indicating that they both added to their NAV positions. Carl Icahn indicated that he holds 8.1 million or 11.9% of outstanding shares, an increase from the 7.3 million shares he held at the end of Q1. GAMCO indicated that it holds 4.3 million or 6.2% of outstanding shares, an increase from the 2.6 million shares it held at the end of Q1.
Also, last Thursday, Richard Schulze, founder and (soon-to-be) Chairman Emeritus of Best Buy Co. Inc. (NYSE:BBY), that is a retailer of consumer electronics, PC and other home office products, mobile phones, entertainment software, major appliances, and related services in the U.S., Canada, Europe and China, filed SEC Form SC 13D/A indicating that he holds 68.9 million or 20.1% of outstanding shares. Mr. Schulze is believed to be involved in an attempt to take the company private, a move that would require him to raise close to $12 billion.
On top of these, institutional investors also indicated via their 13D/G filings last week that they cut their positions in the following two retail and financial sector companies:
- Dillard's Inc. (NYSE:DDS), a national home furnishings, cosmetics and fashion apparel retailer operating over 300 department stores, in which value guru Mason Hawkins' Southeastern Asset Management, that manages the Longleaf Partners Funds, filed SEC Form SC 13G/A indicating that it no longer holds any shares of the company, selling completely out of the 2.6 million share position that it held at the end of Q1; and
- Old Republic International Corp. (NYSE:ORI), that is engaged in underwriting insurance products in the U.S., including property and liability, mortgage guaranty, title and life and health insurance, in which Los Angeles-based international-focused investment management firm Tradewinds Global Investors filed SEC Form SC 13G/A indicating that it holds 7.4 million or 2.9% of outstanding shares, a decrease from the 13.1 million shares it indicated holding in a prior SC 13D/G filing four weeks ago, and also below the 17.5 million shares it held at the end of Q1.
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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