Why is Highbridge Capital Upping Its Stake in This Tech Company?

HIGHBRIDGE CAPITAL MANAGEMENTIn a 13G filing last week, billionaire fund manager Glenn Russell Dubin of Highbridge Capital Management announced that his firm now had a 5.15% ownership stake in Echostar Corporation (NASDAQ:SATS), buying over 400,000 shares. Dubin co-founded Highbridge in 1992 with childhood friend Henry Swieca. In 2004, they sold a majority stake in the firm to JPMorgan Chase for $1.3 billion, and the firm has around $29 billion AUM.

At the end of 2Q, Highbridge owned 1.6 million shares of Echostar. The firm’s new stake is a 25% increase. With this purchase Highbridge overtakes Kensico Capital as the top shareholder of funds we track. Kensico owned 1.9 million shares as of the end of 2Q. Other notable managers owning the stock are Jim Simons and George Soros. Check out all the funds owning Echostar here.

The company is up over 40% year to date, but is relatively flat since February. However, the company is up almost 4% this week alone on the news that DISH Network Corp. (NASDAQ:DISH) will use one of Echostar’s satellites to offer its satellite-based broadband service to the rural U.S. market starting in October. Echostar is in the business of providing set-top boxes and related products for satellite television providers and is closely affiliated with DISH—owning and maintaining all of the company’s satellites.

DISH is the second largest satellite TV operator in the U.S., and will become the first to provide satellite net services in rural areas. DISH’s key rival, DIRECTV (NASDAQ:DTV), plans to launch similar services in 2013. DISH is already providing satellite Internet service using the network of ViaSat Inc. (NASDAQ:VSAT) in certain parts of the U.S. particularly in the West Coast. Both the existing and new services will be offered under the dishNET brand. The FCC estimates that some 14.5 million rural people do not have access to high speed Internet.

George Soros and Jim Simons are both invested in DISH, in addition to Echostar. However, DISH’s competitor DIRECTV has one of the heaviest hitters in its corner when it comes to top fund managers—Warren Buffett—find out why Buffett is a DIRECTV subscriber. In addition to the Oracle of Omaha, Mason Hawkins has over 6% of his firm in DIRECTV.

ViaSat had another big announcement last month by saying that its Internet brand, Exede Internet, was expanding to serve commercial airlines. This will allow airlines to offer high-speed service to each passenger, versus an aggregate bandwidth that all passengers compete for. However, the stock is still flat over the past month, as EPS have missed estimates by at least 50% the last two quarters and full year 2012 is expected to be down over 100% from 2011. Most notable for ViaSat is that big-time investor Seth Klarman has over 10% of his firm’s, Baupost Group, 13F portfolio invested in the company.

Other notable competitor to Echostar and the satellite providers is TiVo Inc. (NASDAQ:TIVO). TiVo provides the services for accessing content across sources, such as linear television, on-demand TV and broadband video—namely through set-top boxes including DVRs—find out why Steven Cohen is building a position in TiVo. TiVo has seen its stock rally from a mid-summer slump after the company announced an acquisition of TRA, Inc. for $20 million.

As far as Echostar is concerned, the company should be considered a speculative play, trading at a trailing P/E of 20, but a forward P/E of 40. The satellite industry is ripe with indirect competitors, and as a result Echostar is only expected to grow EPS at a 5% CAGR over the next half-decade. The competition looks to only be getting stronger as Netflix expands and Amazon takes a serious look at the industry. We also do not like Echostar’s continued overexposure to DISH since breaking from the company in 2008. There is too much uncertainty in the satellite and streaming content market for us to get as excited as Highbridge is about the company.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!