Hedge Funds’ Latest Stock Sales and Purchases

The week that started on Feb. 17th saw several major hedge funds complete important transactions in the stock market.  Let’s take a look at some of the most relevant ones:

Between Tuesday and Thursday – inclusive- Edward Lampert (ESL Investments and others) sold 1.189 million shares of AutoNation, Inc. (NYSE:AN) for prices ranging from $51.00 per share to $52.02 per share. He still holds a significant stake in the company, which amasses around 14.68 million shares. The main motivation behind this trend might be AutoNation, Inc. (NYSE:AN)’s mediocre (on-average) fundamentals -which are expected to experience further pressure as the decline in new-and-used-vehicle sales continues, and limited growth prospects for the next couple of years.

ESL INVESTMENTS

 

Moreover, it is not only Mr. Lampert, who is retreating from AutoNation, Inc. (NYSE:AN). The second-largest institutional shareholder, Murray Stahl’s Horizon Asset Management has also reduced its stakes in the auto-retailer by around 8% in the latest round of 13F filings, holding currently around 5.6 million shares.

The week witnessed another important sale: Neal C. Bradsher’s Broadwood Capital got rid of more than 10% of its participation in Questcor Pharmaceuticals Inc (NASDAQ:QCOR), a mid-cap biopharmaceutical company, that provides prescription drugs for the treatment of multiple sclerosis, nephrotic syndrome, and infantile spasms indications. The fund disposed of 306,400 shares of the company, for prices between $73 per share and $78 per share. Following the transactions, Broadwood holds around 2.33 million shares of Questcor.

The stock of Questcor Pharmaceuticals Inc (NASDAQ:QCOR) currently trades at $76.60 per share, at only 18 times the company’s earnings (versus an industry average of 74x). However, the stock is currently trading very close to the high-end of its 52-week moving average, having experienced an increase in price of almost 43% since the beginning of the year. So, even in spite of the stock’s cheap valuation and industry leading margins, returns, and growth history and prospects, this week was a particularly good one to make some money out of preexisting holdings. Moreover, the fund still owns more than 2.33 million shares.

Additionally, on Feb. 18th, Frank Lagrange Johnson’s Lagrange Capital shrank its stakes at Forward Industries, Inc. (NASDAQ:FORD), a nano-cap designer, marketer, and distributor of carry and protective solutions primarily for hand held electronic devices. The company’s negative margins and returns, lack of growth story and limited prospects, make Johnson’s move quite comprehensible.

On the other hand, several acquisitions took place this week. Brookside Capital bought 1.47 million shares of Concert Pharmaceuticals Inc (NASDAQ:CNCE), some of which it paid for, and others of which it received as part of a stock conversion plan. Following these transactions, the fund owns around 1.50 million shares of the company, worth more than $43 million. Given the company’s reduced scale, very weak fundamentals, unpleasant debt profile and above-average valuation, Brookside must be betting on future growth.

Finally, I would like to briefly look into Leon Coopermans (Omega Advisors) purchase of 60,000 shares of Atlas Resource Partners, L.P. (NYSE:ARP), a $1.26 billion market cap independent developer and producer of natural gas, crude oil and natural gas liquids, with operations in basins across the United States. The acquisitions, all made for $20.80 per share, were then divided among diverse owners (Cooperman himself, his son, and some of the accounts he manages). He now owns, both directly and indirectly, more than 6.8 million shares of the company, worth more than $140 million. This makes it the third largest institutional shareholder of the company, and the largest one among hedge fund managers. Like in the previous case, the bet seems to be placed on long-term growth, as the company boasts negative margins and returns. However, an 11.12% dividend yield, certainly makes it an interesting investment.

Disclosure: Javier Hasse holds no position in any stocks mentioned

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