The hedge fund industry is required to file quarterly 13F filings within 45 days after the end of each fiscal quarter. This implies that retail investors monitoring hedge funds’ moves will get the chance to see all noteworthy hedge fund moves by mid-May. However, investors can also keep track of hedge funds’ 13D, 13G, and Form 4 filings, which disclose more up-to-date moves with regard to certain high-conviction ideas. So let’s discuss three SEC filings recently submitted by several hedge funds tracked by Insider Monkey.
At Insider Monkey, we track around 730 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).
Billionaire Andreas Halvorsen Buys New Stake in Independent Oil and Gas Company
In a new Schedule 13G, Andreas Halvorsen’s Viking Global Investors LP disclosed a new stake of 10.13 million shares of Rice Energy Inc. (NYSE:RICE), which account for 6.5% of the company’s outstanding common stock. While the 13G does not reveal at which price levels the 10.13 million-share stake was acquired, it is highly likely that Mr. Halvorsen’s investment firm purchased the stake through a freshly-completed public offering. Specifically, the independent natural oil and gas company completed the public offering of 29.86 million shares on April 15 at a price of $16.35 per share, of which 9.86 million were sold by a selling stockholder. Rice Energy Inc. (NYSE:RICE) intends to use $200 million of the net proceeds of $312 million to acquire Marcellus and Utica assets from Alpha Natural Resources, which filed for chapter 11 bankruptcy protection in August 2015, while the remainder are said to be used for general corporate purposes.
Earlier this month, Moody’s Investors Service confirmed Rice Energy’s B2 Corporate Family Rating, saying that “Rice’s rating confirmation and stable outlook reflect the company’s continued strong growth in production and proved developed reserves, which we expect will continue through 2017, supported by a good liquidity profile”. Going back to the aforementioned acquisition of assets, Rice Energy recently entered into a stalking horse asset purchase agreement with a subsidiary of Alpha Natural Resources to acquire leasehold interest in approximately 27,400 net undeveloped Marcellus acres, as well as an additional 3,200 gross acres owned in fee that are leased to Rice. However, Rice Energy may not be able to acquire Alpha’s assets given that other possible buyers may submit competing bids for the bankrupt company’s assets once the stalking horse makes its bid.
The independent natural oil and gas company has seen its market capitalization gain 51% since the beginning of 2016. There were 19 hedge funds monitored by Insider Monkey with stakes in Rice Energy at the end of 2015, which amassed nearly 26% of the company’s shares. Ken Griffin’s Citadel Advisors LLC owned 10.72 million shares of Rice Energy Inc. (NYSE:RICE) at the end of December.
Let’s move on to the next pages of this article, where we will discuss two separate SEC filings submitted by two hedge funds tracked by Insider Monkey.
PAR Capital Management Buys More Shares of This Airline Company
According to a freshly-submitted Form 4 filing, Paul Reeder and Edward Shapiro’s PAR Capital Management LP purchased 1.13 million shares of United Continental Holdings Inc. (NYSE:UAL) on Thursday and 780,000 shares on Friday at prices that ranged from $50.49 to $53.21 per share. After the recent purchases, PAR Capital Management owns 16.29 million shares of the airline, which account for 4.84% of its total number of outstanding shares.
Earlier this month, United Continental Holdings Inc. (NYSE:UAL) reached an agreement with both PAR Capital Management LP and Brad Gerstner’s Altimeter Capital Management LP, which owns 11.51 million shares of the airline, under which the size of the Board was increased to 17 from 15 and Mr. Shapiro and Barnaby Harford were appointed to fill the two freshly-created vacancies. In separate SEC filings submitted earlier this year, the two shareholders mentioned above stated that United Continental “has been the worst-performing U.S. airline stock over the last five years” despite having premier, industry-leading strategic assets such as significant scale advantages, strong brand recognition, among other things. To be more detailed, the two shareholders said that United Continental’s weak stock performance reflects “substantial underperformance in terms of operational reliability, customer satisfaction, market share, profitability, and return on invested capital”, for which United’s “underqualified, ineffective, and entrenched Board” could be blamed.
The airline’s Chief Executive Officer and President Oscar Munoz purchased 19,800 shares on Friday for approximately $1 million, which is yet another sign that the company is moving in the right direction. Shares of United Continental are down 12% year-to-date and change hands at around 5.7-times expected earnings, significantly below the forward PE multiple of 17.8 for the S&P 500 Index. David Keidan’s Buckingham Capital Management owns 45,345 shares of United Continental Holdings Inc. (NYSE:UAL) as of March 31.
Bridger Management Doubles Stake in This DNA Sequencing Company
As revealed by a Schedule 13G filing, Roberto Mignone’s Bridger Management LLC more than doubled its stake in Pacific Biosciences of California (NASDAQ:PACB) to 4.46 million shares, which make up 5.1% of the company’s outstanding common stock. This represents an increase from the stake of 2.16 million shares disclosed in Bridger’s 13F filing for the final quarter of 2015.
Pacific Biosciences of California (NASDAQ:PACB) designs, develops and manufactures sequencing systems to assist scientists resolve genetically complex problems and entered the market with its first commercial product, called the PacBio RS System, in the second quarter of 2011. In the September of 2015, the DNA sequencing company announced the launch of the Sequel System, which received 30 orders during the first quarter of 2016. The company’s total revenue in 2015 was $92.78 million, but the company said during its earnings call for the first quarter of this year that it anticipates total revenue of at least $93 million for 2016. Pacific Biosciences generates higher margins from the freshly-launched Sequel System, so the company is on track to reach profitability should the Sequel System experience strong demand. Pacific Biosciences also anticipates gross margin to be in the high 40%’s for 2016.
The shares of the DNA sequencing company are up 83% in the past 12 months, despite a 21% drop registered year-to-date. The number of money managers from our system with stakes in Pacific Biosciences increased to 18 from 11 during the December quarter. Murray Stahl’s Horizon Asset Management owns 12,000 shares of Pacific Biosciences of California (NASDAQ:PACB) as of March 31.