Billionaire Barry Rosenstein Cashes In On Walgreens, While 2 Other Funds Make Bullish Moves On These Stocks

Hedge fund investors and other money managers have filed their 13Fs for the September quarter, but those positions may be substantially outdated considering that two months have already passed since the end of the quarter. Although there is a strong anti-hedge fund sentiment in the media, these investment vehicles still generate significant risk-adjusted returns for their investors. Therefore, it is worth looking at how hedge funds are trading the shares of different companies in order to get a general view of the potential of those companies. 13G, 13D and Form 4 filings represent another way of tracking hedge funds’ moves, which offer fresh insights about the opportunities or challenges encountered by certain companies. For that reason, the following article will discuss three freshly-submitted filings with the SEC by several widely-known hedge funds tracked by Insider Monkey.

We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about six basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated ten percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 in real time and these stocks have beaten the market by 53 percentage points (102% return vs. the S&P 500’s 48.7% gain) over the last 38 months (see the details here).

In a Schedule 13G filed with the SEC, Daniel S. Och’s OZ Management reported owning 25.73 million class A ordinary shares of 21Vianet Group Inc. (NASDAQ:VNET), accounting for 5.6% of the company’s outstanding stock. This denotes an increase of 8.71 million class A shares from the position held at the end of the third quarter (OZ Management owned 2.43 million American depository shares on September 30, each representing six class A ordinary shares). The carrier-neutral internet data center services provider, which operates in China, has seen its stock advance by 30% since the beginning of the year. On Tuesday, 21Vianet Group Inc. (NASDAQ:VNET) reported its financial results for the third quarter, posting net revenues of RMB924.1 million ($145.4 million), which were up by 18.7% year-over-year. The company posted a net loss of RMB57.9 million ($9.1 million), compared with a net income of RMB37.9 million ($5.93 million) reported a year ago. 21Vianet anticipates even higher revenues for the fourth quarter, which are expected to come in the range of RMB969 million-to-RMB1.0 billion ($151.86 million-to-$156.53 million) . That would mark an increase of 15% year-over-year at the mid-point.

21Vianet Group has lost some of its charm among the smart money investors observed by Insider Monkey, as the number of hedge funds invested in the stock declined to 15 from 17 during the third quarter. Even so, the value of their investments grew to $208.57 million from $168.61 million quarter-over-quarter. These 15 investors owned slightly more than 13% of the company’s common stock on September 30. Lei Zhang’s Hillhouse Capital Management holds a 2.13 million-share position in 21Vianet Group Inc. (NASDAQ:VNET) as of September 30.

The next page of this article reveals two separate moves made by Armistice Capital and JANA Partners.

According to a separate 13G filing, Steven Boyd’s Armistice Capital currently holds a stake of 2.02 million shares in Freshpet Inc. (NASDAQ:FRPT), which compares with the 1.12 million-share position it reported via the latest round of 13F filings. The freshly-upped stake now represents 6.0% of the company’s outstanding shares. Freshpet, which was started “with a single-minded mission to bring the power of natural, fresh food to our dogs and cats”, has lost investor interest since its 2014 IPO, with the company’s financial performance being particularly disappointing to most investors. Earlier this month, Freshpet Inc. (NASDAQ:FRPT) reported a net loss per share of $0.05 on revenues of $30.6 million, while analysts had anticipated the company to post a net loss per share of $0.04 on revenues of $32.56 million. Additionally, the company slashed its revenue guidance for 2015, and now anticipates full-year revenue in the range of $115.5 million-to-$117 million. A recent filing with the SEC discloses that the company has kicked off a capital expansion project at its Freshpet Kitchens manufacturing facility in order to increase its plant capacity and boost distribution, but it is highly unlikely that the current demand for its products necessitates production capacity expansion.

The hedge fund sentiment towards the stock did not change during the third quarter, as the number of smart money investors with positions in the company remained unchanged at six. However, these hedge funds amassed 8.80% of Freshpet’s outstanding common stock as of September 30, while the value of their positions climbed to $30.92 million from $25.17 million quarter-over-quarter. Ken Griffin’s Citadel Advisors LLC holds nearly 558,000 shares of Freshpet Inc. (NASDAQ:FRPT) as of the end of September.

A freshly-filed Form 4 reveals that Barry Rosenstein of JANA Partners cashed out 1.45 million shares of Walgreens Boots Alliance Inc. (NASDAQ:WBA) on Thursday and Friday, at prices in the range of $81.97-to-$83.04 per share.  After the recent sizable sell-off, the investment firm holds an ownership stake of 12.30 million shares. Shares of the pharmacy-led health and wellbeing enterprise are nearly 9% in the green year-to-date and are trading at a fair trailing price-to-earnings ratio of 20.58, which compares with the ratio of 23.12 for the S&P 500 Index. The retail pharmacy and pharmaceutical wholesale industries have witnessed strong consolidation in the past several years, and Walgreens has been a part of that wave of activity. The increase in the number of people with insurance coverage for prescription drugs, which has been partially boosted by the Patient Protection and Affordable Care Act, is set to benefit Walgreens Boots Alliance Inc. (NASDAQ:WBA) in the future. Furthermore, baby boomers, who are becoming eligible for the federally-funded Medicare Part D prescription program, will also assist Walgreens’ future growth.

Walgreens’ stock received more attention from the hedge funds tracked by our team in the third quarter, with the number of smart money investors with positions in the company increasing to 91 from 81 quarter-over-quarter. Similarly, the value of these positions grew to $9.52 billion from $9.13 billion during the three-month period. Andreas Halvorsen’s Viking Global owns 23.27 million shares of Walgreens Boots Alliance Inc. (NASDAQ:WBA) as of September 30.

Disclosure: None