Melqart Asset Management’s Latest Gaming and Tech Stock Moves

Michel Massoud’s Melqart Asset Management is an event-driven hedge fund that was founded by Massoud in 2015. Melqart employs a fundamental bottom-up approach to portfolio construction and utilizes three main sub-strategies, which are merger arbitrage, sub-investment grade credit, and special situations equity.

By 2017 the fund’s assets had already risen to over $600 million, prompting it to place a hold on accepting new clients. Nonetheless, Melqart’s AUM surpassed $1 billion by 2018 after the fund returned a stellar 24.59% in 2017 and by 2020 it was again seeking to raise money to capitalize on widening deal spreads. Through the third quarter of 2018, Melqart’s compound annual return stood at 14.84%.

Below we’ll take a glimpse into Melqart’s long portfolio and see how it traded some leading gaming and tech stocks in Q2.

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New Positions Added by Melqart Asset Management in Q2

Acacia Communications, Inc. (NASDAQ:ACIA)

Shares Bought During Q2: 1.09 million
Value of Holding (as of June 30): 73.30 million

Q3 Return: 0.31%

Acacia Communications is still going through the lengthy regulatory approval process when it comes to its pending acquisition by Cisco Systems, Inc. (NASDAQ:CSCO). The deal has received approval in Germany, the U.S and Australia. Chinese approval is reportedly moving closer as well, with some conditions potentially being imposed that would relate to the availability of Acacia’s products in the country.

Melqart was one of numerous hedge funds to open positions in Acacia Communications, Inc. (NASDAQ:ACIA) during Q2, as there was a 55% jump in ownership of the stock among the hedge funds tracked by Insider Monkey. Dmitry Balyasny’s Balyasny Asset Management and Louis Bacon’s Moore Global Investments were among the other funds to open new ACIA positions.

Melqart Asset Management Bought Shares in Q2

NXP Semiconductors NV (NASDAQ:NXPI)

Shares Bought During Q2: 8,100 (+3% quarter-over-quarter)
Value of Holding (as of June 30): $29.43 million

Q3 Return: 9.44%

NXP Semiconductors NV (NASDAQ:NXPI) is well off its previous heights of hedge fund ownership in 2017 and 2018, when more than 90 funds were long the stock. That figure dipped close to 50 at the end of Q1, but did rebound strongly in Q2 to 67.

For its part, Melqart added 8,100 shares to its NXPI position in Q2 ahead of a strong quarter for the semiconductor manufacturer and its stock, the former of which saw demand rebound strongly in key end markets like mobile and automotive. The company is now guiding for Q3 revenue of $2.27 billion, well ahead of Wall Street’s $2.05 billion estimates.

Take-Two Interactive Software, Inc. (NASDAQ:TTWO)

Shares Bought During Q2: 250 (+1%)
Value of Holding (as of June 30): $6.08 million

Q3 Return: 18.38%

Take-Two Interactive Software, Inc. (NASDAQ:TTWO) hit an all-time high in hedge fund ownership at the end of Q1 before declining slightly in Q2. While TTWO lags behind its two publicly traded rivals discussed below in terms of hedge fund sentiment, all three video game developers have strong support in relation to relatively modest market caps.

The pandemic has mostly proven to be a major boon for the gaming industry, with millions of bored new hermits turning to online gaming for some stress relief and human interaction. Take-Two had some of the most popular games during the pandemic including Grand Theft Auto Online and Red Dead Online, bringing in Q1 (ended June 30) revenue of $831.3 million, a 54% surge from a year ago.

Melqart Asset Management Sold Shares in Q2

Activision Blizzard Inc. (NASDAQ:ATVI)

Shares Sold During Q2: 34,000 (-40%)
Value of Holding (as of June 30): $3.83 million

Q3 Return: 6.65%

Melqart sold off 40% of its stake in Activision Blizzard Inc. (NASDAQ:ATVI) even as other hedge funds are fighting over themselves to get a piece of the stock. Hedge fund ownership of Activision Blizzard has more than doubled in the last year, pushing it into the top 30 most popular stocks among hedge funds.

Activision had some hit pandemic games of its own, most notably Call of Duty: Modern Warfare, which surged to second on the sales charts in June. Twitch viewership of the game also more than doubled during Q2. The strong performance allowed Activision to raise its full-year sales forecast by $730 million in August, predicting 2020 adjusted revenue of $7.63 billion.

Electronic Arts Inc. (NASDAQ:EA)

Shares Sold During Q2: 27,250 (-54%)
Value of Holding (as of June 30): $3.00 million

Q3 Return: -1.24%

At one time the far and away favorite video game stock among hedge funds, Electronic Arts Inc. (NASDAQ:EA) now widely trails Activision Blizzard, having lost 15% of its hedge fund support over the past two years. It’s also failed to impress the wider investment community recently, with shares declining in Q3 while those of its rivals jumped.

Despite that, EA did boast an impressive June quarter, the strongest in its 38-year history, as revenue hit $1.46 billion and profit came in at $365 million. The Sims 4 was one of EA’s big winners during the pandemic-stricken Q2, reaching 30 million players lifetime and hitting record engagement numbers. Madden NFL 20 was another touchdown for EA, with Madden Ultimate Team engagement more than doubling from Madden NFL 19.

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Video: Top 5 Stocks Among Hedge Funds

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Disclosure: None. This article is originally published at Insider Monkey.