Pentwater Capital Management is a hedge fund founded and managed by Matthew Halbower in 2007. He employs an event-driven investing strategy, with the equity portfolio valued at a little over $2.7 billion. During the first quarter of 2013, Halbower has made some important changes to his holdings, particularly in special situations plays. It’s important to track hedge fund sentiment because it has been found that retail investors can outperform the market if they know where to look.
Top dog
The top pick of Halbower is Sprint Nextel Corporation (NYSE:S). Pentwater Capital increased its ownership of Sprint Nextel Corporation (NYSE:S) by 66% in the first quarter (compared to the end of 2012), and currently owns a little over 31 million shares with a reported value of $195 million. The stock’s price has advanced 27% in 2013, and it did beat the Street’s expectations in its latest earnings report. The telecom posted a loss of $0.21 per share and revenues of $8.8 billion, versus estimates of EPS of -$0.27 and revenues of $8.7 billion for the second quarter.
In case you’ve been living under a rock, in October 2012, Japanese telecommunications company SoftBank declared their intention to acquire 70% of Sprint Nextel Corporation (NYSE:S) for $20.1 billion. On April 15, 2013, a higher preliminary offer of $25.5 billion was made by DISH Network Corp (NASDAQ:DISH), and rumors now say that Sprint Nextel Corporation (NYSE:S) is planning on delaying shareholders’ SoftBank vote until DISH Network Corp (NASDAQ:DISH) can work out a binding offer.
This makes logical sense, just as it does for investors to consider following Pentwater into Sprint Nextel Corporation (NYSE:S). Wall Street sees the stock as a merger arbitrage play, with its average price target representing a 3.5% upside from current levels. Someone will lose this bidding war, but it will not be Sprint Nextel Corporation (NYSE:S), and regardless of what happens, there’s potential for more appreciation in the future.
Number two
Virgin Media Inc. (NASDAQ:VMED) has been a very popular stock lately, with many hedge funds opening massive positions in the British entertainment and communications provider in the past two quarters. Pentwater Capital did not stay behind, acquiring 3.8 million shares, valued at $186 million in Q1. The company posted earnings of $0.48 per share and revenues of $1 billion in its latest quarter, and on February 6th, US cable company Liberty Global Inc. (NASDAQ:LBTYA) announced an agreement to takeover Virgin Media Inc. (NASDAQ:VMED) for a reported $15.8 billion. On April 15, the European Commission gave the deal the green light, and like Sprint, it’s clear that Pentwater was optimistic that no regulatory fears were warranted in the deal.
