Many leading funds, including Greenlight Capital, Goldman, and Wellington, filed forms 13-D and 13-G (and form 4) with the SEC last week (June 11th to 15th, 2012), indicating that they had amended their ownership in U.S. traded public companies operating in the tech, retail, industrial and service sectors. The following summarizes two noteworthy buys and six sells in those 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:
Seagate Technology (STX): Seagate manufactures hard disk drives for the enterprise, desktop, mobile computing and consumer electronics markets. On Monday, guru David Einhorn's shareholder activist hedge fund Greenlight Capital filed SEC Form SC 13G indicating that it holds 23.1 million or 5.4% of outstanding shares, an increase from the 14.5 million shares that it held at the end of Q1.
STX shares have recently pulled back 28% from the highs last month, after a stellar seven-month rally that took shares up to 3.5xfold from the lows in early October of last year. While quarter results continue to be impressive for both STX and its chief rival in hard-disk drive industry, Western Digital (WDC), as evidenced by strong revenue and earnings growth and the obliteration of analyst earnings estimates every quarter recently, it is concern looking three-to-six months out that has driven these stocks down.
The Street is concerned about a number of things. First, there is increasing evidence that pricing premium resulting from supply disruptions as a result of the Thai flooding is dissipating, taking the wind away from the back of these stocks. Second, PC demand and the resulting demand for components, including hard-disk drives, is beginning to show signs of weakening. And finally, there is rising concern over the impact of solid-state drives and their increasing adoption in laptops that may displace HDDs out of this important market segment.
The stock trades at a ridiculously low 2.5 forward P/E, while earnings are projected to rise from $4.58 on TTM (trailing-twelve-month) basis to $9.46 in FY 2013 (ending June) at an impressive annual growth rate of over 75%. However, despite this and WDC's equally impressive 3.3 forward P/E, both stocks fail to get any respect on the Street. However, if both companies continue delivering stellar profits like they have recently, it will be difficult to hold their price down for long. Furthermore, STX has also been aggressively buying back shares, thereby reducing its share count that boosts EPS. Also, the company has been in the solid state hybrid drive business for some time, that combines the speed and stability of a solid state drive with the high capacity of a hard disk drive. With its low valuation, high growth, exploding markets for storage needs, share buybacks, and a good 4.3% dividend yield, STX seems to have something for almost every kind of investor.
In addition to STX, institutions also indicated via their 13D/G filings last week that they accumulated shares in NII Holdings Inc. (NIHD), that provides wireless communications services under the Nextel brand name to businesses and individuals in Mexico, Brazil, Argentina, Peru, and Chile, in which Jennison Associates, with $150 billion in assets under management, filed SEC Form SC 13G/A indicating that it holds 19.5 million or 11.4% of outstanding shares, an increase from the 15.7 million shares that it held at the end of Q1.
On top of these, institutional investors also indicated via their 13D/G filings last week that they cut their positions in the following six tech, retail, industrial and service sector companies:
- Barnes & Noble Inc. (BKS), that made its name as the operator of retail bookstore chain Barnes & Noble with over 1,300 bookstores in 50 states selling books, magazines, and music, and is rapidly transforming into a content, commerce and technology company, in which mutual fund powerhouse Fidelity Investments filed SEC Form SC 13G/A indicating that it holds 1.2 million or 2.0% of outstanding shares, a decrease from the 5.6 million shares it held at the end of Q1.
- Comverse Technology Inc. (CMVT), that is a provider of computer and telecom systems and software for multimedia communications and information processing applications, used in a broad range of applications by fixed and wireless telephone network operators, government agencies, call centers, financial institutions and other public and commercial organizations worldwide, in which San Francisco-based technology-focused hedge fund Artis Capital Management, with over $1 billion in 13-F assets, filed SEC Form SC 13G/A indicating that it holds 2.7 million or 1.2% of outstanding shares, a decrease from the 12.1 million shares it held at the end of Q1.
- DDR Corp. (DDR), that is a REIT that acquires, develops, leases and manages shopping centers, mini-malls and lifestyle centers across the U.S., in which Deutsche Bank AG filed SEC Form SC 13G/A indicating that it holds 14.1 million or 5.0% of outstanding shares, a decrease from the 14.8 million shares it held at the end of Q1.
- Dollar General Corp. (DG), that is a discount retailer of general merchandise items in the U.S., including highly consumable, seasonal, home products and basic clothing categories, in which Goldman Sachs filed SEC Form 4 indicating that it sold 7.4 million shares, ending with 24.3 million shares after the sale.
- Triumph Group Inc. (TGI), that designs, engineers, manufactures, repairs, overhauls and distributes aerostructures, aircraft components, accessories, subassemblies, and systems worldwide, in which Washington, DC-based global asset management firm The Carlyle Group, with over $150 billion in assets under management, via its affiliate DBD Investors V Holdings, filed SEC Form SC 13D/A indicating that it sold out almost completely out of its 3.2 million share position that it held at the end of Q1.
- United Rentals Inc. (URI), one of North America's largest equipment rental companies, offering equipment rentals and sales via over 500 locations in the U.S. and Canada, in which mega fund Wellington Management, with $254 billion in 13-F assets, filed SEC Form SC 13G/A indicating that it holds 1.3 million or 1.4% of outstanding shares, a decrease from the 2.8 million shares that 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.
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