Billionaire activist Carl Icahn has had a quite busy year, from taking a large stake in Transocean LTD (NYSE:RIG) to a charged confrontation with Bill Ackman on CNBC. Icahn’s latest move, according to a 13G filed with the SEC, has been building a position in Nuance Communications Inc. (NASDAQ:NUAN) up to a total of over 29 million shares. This gives him 9.3% of the total shares outstanding of the $6.8 billion market cap software company whose products include dictation, speech recognition, and other language and voice services; its software is often used in smartphones. Icahn’s 13F for the fourth quarter of 2012 does not show him owning any shares of Nuance Communications Inc. (NASDAQ:NUAN) at the beginning of January, and also suggests that this Nuance position would be one of his larger holdings. Find Icahn’s favorite stocks.
The first quarter of Nuance Communications Inc. (NASDAQ:NUAN)’s fiscal year ended in December, with the company experiencing a 28% increase in revenue compared to the same period in the previous fiscal year. Costs were up strongly, however, resulting in negative earnings (as opposed to a small amount of profits a year earlier). Nuance’s net losses do flip to profits if we add back R&D (which some analysts argue is appropriate for technology based companies, since these can be considered a form of investment rather than purely an operating expense) but we still get the quantity of earnings plus R&D as decreasing despite the rise in sales. Currently the stock trades at 39 times trailing earnings, as both markets and sell-side analysts expect high growth; some investors- including possibly Icahn- might also be hoping for the company to be acquired. Analyst expectations give a forward P/E of only 11. The stock price has fallen 23% in the last year as financial performance has lagged, and the most recent data shows that Icahn’s stake is offset by the 11% of outstanding shares held short.
We track quarterly 13F filings by hedge funds and other notable investors in our database, allowing us to develop investing strategies based on the included information (for example, we have found that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year) and to see which funds liked Nuance Communications Inc. (NASDAQ:NUAN) at the end of December. We see that Renaissance Technologies, whose founder Jim Simons is now a multi-billionaire, owned 1.6 million shares at the end of December (see Renaissance’s stock picks). Par Capital Management was also a major shareholder after increasing its stake by 14% between October and December 2012.