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Relational Investors Further Reduces Stake In PMC-Sierra Inc (PMCS)

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Relational Investors has reported, in a recent filing with the Securities and Exchange Commission, a further reduction in its holding of PMC-Sierra Inc (NASDAQ:PMCS). Around 7.61 million shares were disposed of, leaving the fund with roughly 9.7 million shares or 4.9% of the company’s outstanding stock. Relational Investors’ management had chosen to sell some 5.5 million PMC-Sierra shares back in May, as part of the stock repurchase agreement signed by the company and the fund. Ralph Whitworth, the fund’s manager, has taken an indefinite leave in July 2014 and the fund management has decided to wind down their operations.

Ralph V. Whitworth

Ralph V. Whitworth
Ralph V. Whitworth
Relational Investors

We don’t just track the latest moves of hedge funds. We are, in fact, more interested in their 13F filings, which we use to determine the top 15 small-cap stocks held by the funds we track. We gather and share this information based on 16 years of research which showed that these 15 most popular small-cap picks have a great potential to outperform the market, beating the S&P 500 Total Return Index by nearly one percentage point per month in backtests, and easily beating the most popular large-cap picks of funds, which nonetheless get the majority of their collective capital. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic only the very best ideas of the best fund managers on your own? Since the beginning of forward testing in August 2012, the Insider Monkey small-cap strategy has outperformed the market every year, returning 123%, more than two times greater returns than the S&P 500 during the same period (see more details).

A provider of semiconductor and software solutions, PMC-Sierra Inc (NASDAQ:PMCS) has never returned to its massive overvaluation before the 2001 tech bubble burst. Following a peak of $255.5 per share in March 2000, the stock experienced a savage crush, wiping most of its value and has been trading in a range between $4 and $21 per unit. So far this year the stock has fallen by 26%. The company has a market cap of $1.35 billion and trades at a trailing Price to Earnings (P/E) ratio of 340, a massive multiple compared to its industry peers, which are traded at an average P/E ratio of 23.10. In terms of revenue PMC-Sierra Inc (NASDAQ:PMCS) is not doing so well either: for the 13 weeks ending June 27, 2015 the company has reported revenues of $124 million, down 1.6% year-over-year and 6.2% lower than the previous quarter. Earnings have also plummeted and turned to a loss of $0.04. Wall Street expects the company to recover in the current quarter and predict revenues of $131 million and earnings per share of $0.12. The stock is mainly recommended as a ‘Hold’ and has a mean price target of $10.29. Among the hedge funds that we track, George Soros‘ Soros Fund Management and Ken Fisher‘s Fisher Asset Management stand out with investments of 2.82 million shares and 11.7 million shares respectively, according to their latest 13F filings.

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