It is widely-known that hedge fund strategies vary quite a lot and thus so do their targets and bets. Some believe that we are entering an era of hedge fund outperformance, as the current state of the U.S equity markets is believed to be the perfect environment for these investment vehicles. Hedge funds’ ability to pinpoint stocks with an attractive risk-reward profile may be invaluable amid a rising interest rate environment and period of slow global growth. Having said that, the following article will discuss four 13G filings submitted with the SEC by the investment firms managed by Peter S. Park, Ricky Sandler, and Andreas Halvorsen.
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Let’s begin our discussion by looking into the 13G filed by Peter Park’s Park West Asset Management LLC, which disclosed ownership of 791,041 shares of Eagle Pharmaceuticals Inc. (NASDAQ:EGRX). This is up by 290,450 shares from the position revealed by the fund’s 13F for the September quarter. The freshly-upped stake accounts for 5.1% of the company’s outstanding common stock. The shares of the pharmaceutical company that focuses on developing injectable products have advanced by 298% over the past year, so Park’s decision to further increase his firm’s stake may appear surprising.
Eagle Pharmaceuticals Inc. (NASDAQ:EGRX)’s product portfolio currently comprises three already-approved products, which include Argatroban, Ryanodex and Diclofenac-misoprostol, and an additional five advanced product candidates. The company’s total revenue for the nine months that ended September 30 totaled $48.05 million, compared to $13.61 million reported a year earlier. Similarly, its product sales for the first nine months of 2015 grew to $10.10 million from $2.40 million. The increase in product sales was mainly attributable to $1.4 million in net product sales of the company’s Diclofenac-misoprostol, which was launched back in January 2015. Analysts anticipate the company to generate earnings per share of $6.46 for fiscal year 2016, which generates a forward price-to-earnings ratio of just 11.70, which could explain why Park is still buying more shares despite the robust gains of the last year.
Not everyone is expecting even bigger things for the stock however. The number of smart money investors with positions in the pharmaceutical company dropped to 15 from 19 during the third quarter. James Dondero’s Highland Capital Management acquired a new stake of 239,508 shares of Eagle Pharmaceuticals Inc. (NASDAQ:EGRX) during the September quarter.
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The next two pages of this article discuss the other three 13G filings.
According to a Schedule 13G filing, Ricky Sandler’s Eminence Capital LP currently owns 4.58 million shares of Take-Two Interactive Software Inc. (NASDAQ:TTWO), which make up 5.4% of the company’s shares. This compares to 3.47 million shares owned at the end of September. The developer and publisher of interactive entertainment has seen its shares gain 10% over the past year, mainly owing to the success of the company’s Grand Theft Auto games, which accounted for approximately 64% of Take-Two’s net revenue for the six months that ended September 30. That net revenue increased by $370.6 million to $622.27 million. Although Take-Two Interactive Software has been doing great in terms of both stock and financial performance, there are several nuances that investors should be aware of when investing in the company. First of all, the company’s net revenue from digital online channels dropped to 57.3% of its net revenue for the six-month period, down from $63.9% reported a year earlier, which could put some weight on profit margins. Secondly, Take-Two Interactive Software mostly depends on its Grand Theft Auto franchise, which is yet another risk factor investors should be cautious of, as customer preferences are often transitory, although popular video game series tend to have a lot of staying power.
In November 2015, Mizuho reiterated its ‘Buy’ rating on the stock and lifted its price target to $37 from $33, which suggests an upside of at least 10%. The hedge fund sentiment towards the stock was negative in the third quarter however, with the number of funds invested in the company declining to 35 from 40 quarter-over-quarter. David Einhorn’s Greenlight Capital holds a 4.16 million-share position in Take-Two Interactive Software Inc. (NASDAQ:TTWO) as of September 30.
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In a 13G filing, Andreas Halvorsen’s Viking Global reported purchasing a new stake of 35.52 million shares of Southwestern Energy Company (NYSE:SWN), which account for 9.2% of the company’s outstanding shares. It appears that the billionaire investor has become even more bullish on the energy sector, but is Southwestern Energy the right bet on the industry? The independent energy company mainly focuses on the development of unconventional reservoirs in Arkansas, Pennsylvania and West Virginia. The company reported a net loss of $2.5 billion for the nine months that ended September 30, compared with net income of $612 million reported for the same period of 2014. Southwestern Energy’s average price realized for its gas production for the nine-month period, including the effects of the company hedging activities, dropped to $2.47 per Mcf from $3.79 per Mcf. The company has a long-term issuer credit rating of BBB- by Standard & Poor’s as of the end of September, which suggests that the energy company has enough liquidity to meet its financial commitments, but a sustained low crude oil price environment, which is a very real possibility, might hinder its ability to meet those commitments. Southwestern Energy has $15 million in cash and cash equivalents as of September 30, while its long-term debt totals $4.66 billion. Hence, one might find more suitable candidates for a longer-term bet on the energy sector. Meanwhile, the stock has plummeted by 66% over the last year. Israel Englander’s Millennium Management reported owning 9.36 million shares of Southwestern Energy Company (NYSE:SWN) via its 13F for the third quarter.
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According to a separate 13G, Viking Global added a 30.85 million-share position in Cabot Oil & Gas Corporation (NYSE:COG) to its portfolio, which represents 7.5% of the company’s outstanding common stock. It is quite evident that the billionaire investor is primarily betting on a rebound for the natural gas industry, presumably because of weather changes. The company’s natural gas revenue for the nine months that ended September 30 accounted for 75% of its total revenue. Nonetheless, Cabot’s natural gas revenue decreased substantially year-over-year due to lower natural gas prices, which were partly offset by increased production as a result of lower cost reserve additions associated with its Marcellus Shale drilling program. The recent winter storm that has impacted the East Coast might ease up the sector’s supply glut, which could push natural gas prices higher.
Viking Global might share the same line of thought, but it remains to be seen where natural gas prices will head from here. Meanwhile, Cabot Oil & Gas Corporation has $8.77 million in cash and cash equivalents as of September 30, while its debt reaches $2.04 billion. Shares of COG have lost nearly 32% over the past one-year period. The smart money sentiment towards the stock was positive in the September quarter, as the total number of funds tracked by Insider Monkey with positions in the company climbed to 32 from 26 quarter-over-quarter. Ross Margolies’ Stelliam Investment Management acquired a 2.17 million-share stake in Cabot Oil & Gas Corporation (NYSE:COG) during the July-to-September quarter.
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