Analysis Of Noteworthy Institutional 5% Ownership Filings On Thursday And Friday

Includes: CJ, DCT, HSH, MRVL, MTEM
by: GuruFundPicks

Many leading funds, including INVESCO, William Blair and Lord Abbett & Co., filed forms 13-D and 13-G (and form 4) with the SEC last week, on Thursday and Friday, March 8th and 9th, indicating that they had amended their ownership in U.S. traded public companies. The following are the most notable filings (for more info on Forms 13-D and 13-G, and how to interpret that, please refer to the end of this article):

Threshold Pharmaceuticals Inc. (THLD): THLD is a biotech company focused on the discovery and development of therapeutics based on tumor hypoxia, a powerful scientific platform that offers broad potential to treat most solid tumors, based on the realization that tumors thrive in areas with low levels of oxygen, or hypoxic regions. On Thursday, Pittsburgh, PA,-based mutual fund powerhouse Federated Investors, with $352 billion in assets under management, including $19.5 billion in 13-F assets, filed SEC Form 13G/A indicating that it holds 5.23 million or 10.2% of outstanding shares, a huge increase from the 1.15 million shares it held at the end of Q4.

The move is particularly striking and indicative of its high degree of conviction, given that THLD shares are by an standard extended, on a technical basis, up over 400% in the last five weeks. The shares have rallied since early February, when the company announced a global agreement with Merck KGaA to co-develop and commercialize THLD's phase 3 hypoxia-targeted drug TH-302. Under the deal, THLD received $25 million upfront, plus further potential milestone and royalty payments, including up to $35 million in additional development milestones during 2012. The total milestone payments under the agreement amount to $525 million, including $280 million in regulatory and development milestones and $245 million in sales-based milestones, a massive boost to the company's $60-$65 million market-cap before the agreement. Also, subsequent to that, on February 21st, the company announced positive phase 2b clinical trial results of TH-302 in pancreatic cancer patients, which triggered another strong rally in THLD shares.

Cavium Inc. (CAVM): CAVM designs, develops and markets semiconductor processors for intelligent and secure networks that enable networking, communications, storage, video and security applications. On Friday, Chicago-based financial services firm William Blair & Co., with $39 billion in 13-F assets at the end of Q4, filed SEC Form SC 13G/A indicating that it holds 5.2 million or 10.6% of outstanding shares, an increase from the 3.7 million shares it held at the end of Q4. William Blair was the largest institutional holder of CAVM shares at the end of Q4, and the move makes them by far the largest holder, well ahead of second place Goldman Sachs with 3 million shares.

In its latest Q4 report last month, CAVM beat analyst earnings estimates (17c v/s 12c), while revenues were in-line and it guided revenues and earnings lower for Q1. The stock currently trades at a premium 26-27 forward P/E and 5.2 P/B compared to averages of 23.0 and 2.1 for its peers in the electronic components semiconductor group.

C & J Energy Services (CJES): CJES provides hydraulic fracturing and coiled tubing services, with a focus on complex, technically demanding well completions, to the large exploration and production companies with unconventional resource positions. On Friday, Jersey City, NJ,-based investment management firm Lord, Abbett & Co., with $41.6 billion in 13-F assets at the end of Q4, filed SEC Form SC 13G indicating that it holds 1.9 million or 3.7% of outstanding shares, a decrease from the 3.44 million shares it held at the end of Q4. Lord Abbett remains the largest institutional holder of CJES even after the sale. CJES shares trade at a current 6.1 P/E and 2.5 P/B compared to averages of 17.7 and 1.5 for its peers in the oil field services group.

Sara Lee Corp. (SLE): SLE is a manufacturer of meats, coffee, teas, household products and baked goods for consumers worldwide. On Thursday, San Francisco-based shareholder activist-oriented hedge fund ValueAct Capital Management, with $5.8 billion in 13-F assets at the end of Q4, filed SEC Form 4 indicating that it sold out of its entire 20.4 million share stake in an open market sale. Value Act, prior to the sale, was the third largest institutional holder of SLE stock, behind State Street Corp. (23.1 million shares) and Vanguard Group (22.9 million shares). SLE currently trades at 20-21 forward P/E and 6.4 P/B, a premium compared to its large-cap peers in the packaged foods group, Kraft Foods Inc. (KFT) that trades at 13-14 forward P/E and 1.9 P/B, and Heinz H J Co. (HNZ) that trades at 14-15 forward P/E and 5.9 P/B.

DCT Industrial Trust Inc. (NYSE:DCT): DCT is a publicly owned REIT that owns, acquires, develops and manages high-quality bulk distribution and light industrial properties in high volume distribution markets in the U.S. and Mexico. On Friday, Atlanta-based investment powerhouse INVESCO Ltd., with over $650 billion in assets under management, including $174.4 billion in 13-F assets at the end of Q4, filed SEC Form SC 13G/A indicating that it holds 25.66 million or 10.4% of outstanding shares, a significant increase from the 14.77 million shares it held at the end of Q4. DCT shares are currently in a bullish consolidation pattern at multi-year highs, and they trade at a current 14 forward P/E and 1.1 P/B compared to averages of 13.8 and 1.2 for its peers in the REIT equity trust group.

General Discussion

Form 13-D is commonly referred to as the "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 were based on SEC filings, Zacks Investment Research, Thomson Reuters and 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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