Do individual investors want to invest like George Soros, Carl Icahn or Barry Rosenstein? The answer would most probably be affirmative, but how is it possible to track hedge fund managers’ spontaneous and up-to-date moves? Some long term-focused investors may rely on quarterly 13Fs submitted by hedge funds to find high-potential stocks, but there appears to be a more efficient way of monitoring hedge funds’ moves. Numerous 13G, 13D and Form 4 filings are submitted with the SEC on a daily basis, which makes it very convenient for individual investors to mimic hedge fund moves in high-conviction stocks. Even skeptical investors about hedge funds’ ability to generate attractive returns could use these filings as a broader analysis process. Having said that, the following article will discuss three SEC filings submitted by hedge funds run by Barry Rosenstein, and two other billionaire investors.
Imitating hedge funds and other institutional investors can help identify some of the most profitable stocks on the market. However, our extensive research that covered the period between 1999 and 2012, showed that the best approach is to follow these investors into their small-cap stocks. Our backtests showed that the 15 most popular small-cap stocks among hedge funds managed to generate a monthly alpha of 81 basis points, versus an alpha of 0.7 percentage points posted by their top 50 large-cap picks (see more details here).
According to a Schedule 13D filing, activist hedge fund JANA Partners LLC initiated a new stake of 5.89 million shares in TeamHealth Holdings Inc. (NYSE:TMH), which accounts for 8.0% of the company’s outstanding common stock. The “activist” filing discloses that JANA Partners believes that the shares of the supplier of outsourced healthcare professional staffing and administrative services are undervalued and represent an attractive investment opportunity. More importantly, JANA believes that TeamHealth Holdings Inc. (NYSE:TMH) “has made missteps in critical areas including capital allocation, strategy and governance”, as well as believes that the company would benefit from new additions to the Board of Directors. For that reason, Barry Rosenstein’s JANA recently informed the company of its plans to nominate Edwin M. Crawford, Nancy M. Schlichting and Scott Ostfeld for election to the company’s Board at the 2016 annual meeting of stockholders. In November 2015, the healthcare staffing company completed the acquisition of acute hospital medicine and post-acute provider IPC Healthcare for $80.25 per share in cash, in an attempt to expand its post-acute care and services business. The shares of TeamHealth Holdings are up by more than 16% in today’s trading session following the release of JANA’s 13D filing, which has pushed the stock into positive territory for the year. There were 25 hedge funds monitored by Insider Monkey that had stakes in the company at the end of the fourth quarter of 2015, which in aggregate accumulated 8.30% of the company’s total outstanding shares. Alan Fournier’s Pennant Capital Management owns 2.91 million shares of TeamHealth Holdings Inc. (NYSE:TMH) as of December 31.
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Let’s head to the next page of this article, which reveal two other moves disclosed by two widely-known hedge funds.
In a freshly-amended 13G filing, David Einhorn’s Greenlight Capital disclosed that the hedge fund is no longer a beneficial owner of more than 5% of Fifth Street Asset Management Inc. (NASDAQ:FSAM)’s outstanding common stock. In fact, Greenlight Capital has no shares of Fifth Street Asset Management as of February 24, 2016. The hedge fund owned 591,686 shares of the alternative asset management firm on December 31, as revealed in its 13F for the last quarter. Fifth Street Asset Management offers asset management services to two publicly-traded business development companies, which include Fifth Street Finance Corp. and Fifth Street Senior Floating Rate Corp. During the third quarter of 2015, FSAM identified errors in the calculations of fees paid by the two BDCs, which were recognized as revenue since the first quarter of 2012 through the second quarter of last year. As a result, the company had to restate its financial statements, even though the cumulative adjustments of those errors were not considered material. Meanwhile, the shares of Fifth Street Asset Management are down 76% over the past 52 weeks, partly owing to poor performance, and pressure from two activist investors. A total of six smart money investors from our system were invested in company at the end of 2015. Royce & Associates, founded by Chuck Royce, owns 369,361 shares of Fifth Street Asset Management Inc. (NASDAQ:FSAM), according to its latest 13F filing.
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As revealed by a newly-amended 13D filing with the SEC, Clint Carlson‘s Carlson Capital currently owns 2.37 million shares of Vitamin Shoppe Inc. (NYSE:VSI), which constitute 9.20% of the company’s outstanding shares. This denotes an increase of 105,108 shares from the stake disclosed in the fund’s latest 13F filing. The shares of the supplement chain have plummeted by 37% over the past 12 months and are down by 18% in 2016 alone. The company has one of the largest portfolios of products among vitamin, mineral, and supplement (VMS) retailers. According to the Nutrition Business Journal (NBJ), the VMS market is worth roughly $38 billion and is anticipated to achieve a compound annual growth rate of 6.2% from 2015 to 2020. Analysts at Piper Jaffray say that 82% of people aged 60 or over consume vitamins, which compares with 71% on average. Moreover, these analysts believe that people aged 65 and over will account for 16% of the nation’s population by 2020 and 19% by 2030, so it seems that Vitamin Shoppe Inc. (NYSE:VSI) has a bright future ahead.
However, the nutritional products manufacturer has been struggling to meet analysts’ expectations on revenue lately. Earlier this week, Vitamin Shoppe reported fourth-quarter total sales of $293.5 million, which were up from $290.1 million reported for the same period of 2014, but below analysts’ revenue estimates of $294.06 million. Nonetheless, the company continues to grow its top-line results, though the rate of growth is weaker-than-expected. Vitamin Shoppe reported net merchandise sales of $1.27 billion for 2015, up from $1.21 billion generated in 2014 and $1.09 billion in 2013. The shares of Vitamin are trading 10.60 times forward earnings, which is below the forward P/E multiple of 15.75 for the S&P 500. The number of funds from our system with stakes in the company dropped to 15 from 17 during the December quarter, while those 15 funds amassed nearly 26% of the company’s common stock. Jamie Zimmerman’s Litespeed Management upped its position in Vitamin Shoppe Inc. (NYSE:VSI) by 61% during the December quarter to 1.26 million shares.
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