Hedge Funds Recently Bought Chimera and More

Pine River Capital disclosed a position of 3.1 million shares of PHH Corporation (NYSE:PHH), which operates a mortgage servicing business as well as offers vehicle leasing services; Pine River is managed by Brian Taylor (check out more stocks Pine River likes). While PHH struggled earlier in 2012, a strong fourth quarter pulled it into the black for the year. The trailing P/E is still high, but the stock trades at only 8 times earnings estimates for this year and at a moderate discount to the book value of the equity. We had thought it might look more attractive if it can continue its profitability for another quarter or two.

WMS Industries Inc. (NYSE:WMS), which is in the process of potentially being acquired by smaller peer Scientific Games Corp (NASDAQ:SGMS) had John Rogers’ Ariel Investments report ownership of almost 8% of the company. Merger arbitrage can offer modest returns, but ones independent of market conditions, and there is a gap of about 4% between WMS’s current share price and the all-cash offer. However, the transaction would come at a large premium to WMS’s former share price and so there would be a significant downside if the deal fell apart. Learn more about merger arbitrage strategies.

Empire Capital Management, which is managed by Scott Fine and Peter Richards, has a stake of 5.4% in Jive Software Inc (NASDAQ:JIVE) with a position composed of both shares and call options. Jive is a cloud-based social business networking software company, a collection of buzzwords which have brought it to a valuation of nearly $1 billion even though it is unprofitable and high revenue growth has not improved its bottom line by much. Even in cash flow terms Jive has been just short of breaking even; 22% of the outstanding shares are held short.

Disclosure: I own no shares of any stocks mentioned in this article.

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