Hedge Funds Were All Over These 5 IPOs in Q4

2015 was a slow year for the IPO market in the U.S, as it struggled to keep up with the growth exhibited during both 2013 and 2014. While a total of 304 entities were listed on U.S exchanges in 2014, raising $81.7 billion in the process, in 2015 there were only 196 IPOs, which in aggregate raised only $33.6 billion. There was also a noticeable downtrend throughout 2015, as the fourth quarter saw only 35 IPOs, a 22% decline from the the third quarter, while the 80 IPOs in the second half of the year were dwarfed by the 116 in the first half. Nevertheless, there were several hedge funds which made a beeline for the shares of some of the companies that were listed during the October-to-December period. We decided to compile a list of these companies based on their ownership at the end of the fourth quarter among the more than 800 hedge funds covered by our database. In this post, we are going to focus on the five IPOs that topped that list.

At Insider Monkey, we track more than 800 hedge funds, whose 13F filings we analyze as part of our small-cap strategy. Our research has shown that imitating a portfolio that includes the 15 most popular small-cap stocks among hedge funds can outperform the market by as much as 95 basis points per month on average (see more details here).

#5 Atlassian Corporation PLC (NASDAQ:TEAM)

– Investors with Long Positions (as of December 31): 22

– Aggregate Value of Investors’ Holdings (as of December 31): $129.76 million

Let’s start with United Kingdom-based enterprise software company Atlassian Corporation PLC (NASDAQ:TEAM). The company was listed on the NASDAQ on December 10, pricing its IPO at $21 per share. Though its stock rose by 20% on the day it made its debut and continued to rise throughout December, it gave up all of those gains this year and even went below its IPO price for a short time. However, it has recouped some of those losses over the past few days and now trades up by 9.5% from its IPO price, though it’s still down by nearly 23.54% year-to-date. For its second quarter of fiscal year 2016, the company reported EPS of $0.11 on revenue of $109.71 million, topping analysts’ projections of EPS of $0.04 on revenue of $102.67 million. For the fiscal third quarter, the company guided revenue to be in the range of $113 million to $115 million, and EPS to be in the range of $0.05 to $0.06.

#4 Four Corners Property Trust Inc (NYSE:FCPT)

– Investors with Long Positions (as of December 31): 24

– Aggregate Value of Investors’ Holdings (as of December 31): $322.07 million

Four Corners Property Trust, Inc. (NYSE:FCPT) became an independent, publicly-traded company after its separation from Darden Restaurants, Inc. (NYSE:DRI) was completed on November 9. Under the terms of the spin-off, shareholders of Darden Restaurants received one share of Four Corners Property Trust for every three Darden shares they owned on November 2. Four Corners Property Trust Inc (NYSE:FCPT) has lost over 28% of its market capitalization this yea,r with most of the losses coming after the REIT declared two dividends totaling $8.32 per share, to be paid to shareholders on January 7.  The REIT is scheduled to report its fourth quarter financial numbers next week and the consensus among analysts is for it to report EPS of $0.19 on revenue of $28.52 million. Jeffrey Smith of Starboard Value, which overthrew Darden’s Board of Directors in 2014 and became its chairman, owns 3.88 million shares of FCPT.

#3 CSRA Inc (NYSE:CSRA)

– Investors with Long Positions (as of December 31): 31

– Aggregate Value of Investors’ Holdings (as of December 31): $669.44 million

CSRA Inc (NYSE:CSRA) was another company that made its debut on the stock market as a result of a spin-off. It became an independent, publicly traded company in late November after Computer Sciences Corp. (NYSE:CSC) completed the spin-off of its U.S public sector business. Though CSRA Inc (NYSE:CSRA)’s stock was on a gradual decline since the beginning of 2016, it changed its trajectory after the company reported its fourth quarter numbers and now trades down by nearly 13% year-to-date. While analysts were expecting the company, which ranks among the largest independent IT service providers to the U.S federal government, to report EPS of $0.42 on revenue of $1.32 billion for the quarter, it delivered mixed results of EPS of $0.48 on revenue of $1.27 billion. On February 24, analysts at Stifel Nicolaus initiated coverage on the stock with a ‘Buy’ rating and $41 price target.

#2 Northstar Realty Europe Corp (NYSE:NRE)

– Investors with Long Positions (as of December 31): 33

– Aggregate Value of Investors’ Holdings (as of December 31): $229.76 million

Moving on, NorthStar Realty Finance (NYSE:NRF) completed the spin-off of its European business into a separate publicly traded REIT, Northstar Realty Europe Corp (NYSE:NRE), on November 2. Three weeks after it became a separate entity, Northstar Realty Europe’s board authorized the company to buy back $100 million worth of its outstanding shares over the following 12 months. Shares of Northstar Realty Europe Corp (NYSE:NRE) traded mostly in a range during 2015, but have plummeted heavily this year, by over 30%. However, they have bounced back in the last two trading sessions and now trade down by only 2.5% year-to-date. The main reason for the turnaround is Cushman & Wakefield’s appraisal of the company’s assets, which found its portfolio valuation to be around $2.6 billion, which implies a net asset value of about $1.1 billion or $18 per share. Shares of NRE are currently trading at just $11.61. Steve Cohen‘s Point72 Asset Management owns 3.30 million shares of Northstar Realty Europe Corp as of December 31.

#1 Hewlett Packard Enterprise Co (NYSE:HPE)

– Investors with Long Positions (as of December 31): 46

– Aggregate Value of Investors’ Holdings (as of December 31): $1.9 Billion

Hewlett Packard Enterprise Co (NYSE:HPE) was the most popular newly listed stock among hedge funds at the end of fourth quarter. The company delivered an earnings and revenue beat for its first quarter of fiscal year 2016 on March 3, after which its shares spiked and are now trading up by 3% year-to-date. The consensus among analysts was for Hewlett Packard Enterprise Co (NYSE:HPE) to report EPS of $0.40 on revenue of $12.68 billion for the quarter, while the company declared EPS of $0.41 on revenue of $12.70 billion. Most analysts who track Hewlett Packard Enterprise Co (NYSE:HPE) are optimistic about its future, since the company is led by an experienced Board of Directors and headed by former HP Inc (NYSE:HPQ) CEO, Mig Whitman. Another reason for their bullishness is the early lead the company has taken in the hybrid cloud market, which is expected to be worth nearly $85 billion by 2019. On March 4, analysts at Sanford C. Bernstein upgraded the stock to ‘Outperform’ from ‘Market Perform’.

Disclosure: None