Want to invest like an elite hedge fund or become an investor in a hedge fund? Hedge fund investing may be quite expensive if considering the 2-and-2o fee structure most hedge funds use, but one can follow the moves made by reputable and successful managers instead. Quarterly 13F filings represent a common way of tracking hedge funds’ moves, but this practice seems to be more suitable for long-term oriented investors. Another way of monitoring smart money investors’ moves is to focus on their 13D, 13G and Form 4 filings, which usually tend to offer more up-to-date insights about their stances on certain companies. For that reason, this article will discuss the content of three public 13Gs filed by several hedge funds tracked by Insider Monkey.
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In a freshly-amended 13G filing, Nantahala Capital Management LLC, managed by Wilmot B. Harkey and Daniel Mack, reported owning 4.51 million shares in FalconStor Software Inc. (NASDAQ:FALC), which account for 11.0% of the company’s outstanding common stock. This compares with the 3.77 million-share position owned at the end of September, disclosed in Nantahala’s latest 13F filing. To begin with, the shares of the software-defined storage company are up 36% in 2015. The company’s business involves selling software solutions and platforms on subscription or consumption basis. FalconStor Software Inc. (NASDAQ:FALC)’s total revenue for the first nine months of this year reached $39.2 million, up 14% year-on-year. However, the company has a working capital deficiency and a stockholders’ deficit, mainly as a result of its deferred revenues balance of $15.5 million, which might hinder the company’s marketing activities and other initiatives. Even so, FalconStor outlines that there is enough liquidity to run its marketing efforts in connection with its new product offering, FreeStor, and expand its portfolio of software offerings.
In the meantime, the number of hedge funds from our extensive database with stakes in the company climbed to six from five during the September quarter, while the overall value of those stakes grew to $12.34 million from $10.19 million. These smart money investors owned 15.10% of the company’s shares at the end of September. John Zaro’s Bourgeon Capital cut its exposure to FalconStor Software Inc. (NASDAQ:FALC) by 19% during the third quarter, remaining with 1.07 million shares.
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The second page of this article discusses Gates Capital Management’s position in an oilfield technology company and Scopia Capital’s move on a coupon websites’ owner.
According to a separate 13G filing, Gates Capital Management, founded by Jeffrey Gates, holds a 5.50 million-share position in Flotek Industries Inc. (NYSE:FTK), which represents 10.2% of the company’s outstanding shares. This marks an increase of 922,249 shares from the position disclosed through the latest round of 13Fs. The shares of Flotek are down by 40% year-to-date, after plunging by 38% since the beginning of November. The Texas-based oilfield technology company offers energy and industrial chemistries and drilling and production technologies, while its main product is a non-toxic solvent, called Complex nano-Fluid (CnF), used for extracting oil from rock formations. The company also has a proprietary tool called FracMax, which measures the production of CnF and non-CnF wells. In early-November, hedge fund Bronte Capital questioned the validity of data used by Flotek to promote its products, implying that the levels of output from the wells that do not use CnF were understated by the FracMax application. Shortly after Bronte Capital publicly revealed its concerns, Flotek Industries Inc. (NYSE:FTK) acknowledged that its earlier data was misstated, claiming that an “unintentional data and processing error” caused the miscalculation. In the meantime, it appears that the worries around this issue have been slowly fading away, as the stock is recovering at a slow but steady pace.
A total of 13 hedge funds tracked by Insider Monkey had positions in the struggling company at the end of the third quarter, down from 14 reported in the prior one. Even so, the value of these positions increased to $173.98 million from $160.05 million quarter-on-quarter. The aforementioned 13 hedge funds accumulated 19.40% of the company’s outstanding shares on September 30. Israel Englander’s Millennium Management owns 2.37 million shares Flotek Industries Inc. (NYSE:FTK) as of the end of the third quarter.
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Scopia Capital Management L.P., founded by Matt Sirovich and Jeremy Mindich, ceased to be the beneficial owner of more than 5% of shares in RetailMeNot Inc. (NASDAQ:SALE), according to a 13G filing. In fact, Scopia Capital sold out its entire 6.92 million-share position in the company held at the end of the third quarter. The company operates the largest marketplace for digital offers and generates most of its net revenues from commissions earned when consumers make purchases by using the offers displayed on the company’s websites and mobile applications. RetailMeNot Inc. (NASDAQ:SALE)’s shares are down by 29% in 2015, but they are still trading at a rather expensive trailing price-to-earnings ratio of 33.16 (the ratio for the S&P 500 Index totals 22.71). The company reported net revenues of $166.0 million for the first nine months of 2015, down by 6.4% year-over-year. Meanwhile, its net income for this year’s nine-month period totaled $2.8 million, compared with $12.9 million generated last year.
RetailMeNot lost its appeal among the hedge funds tracked by Insider Monkey during the third quarter, as the number of funds invested in the company dropped to 15 from 21 quarter-on-quarter. These smart money investors owned 18.00% of the company’s shares on September 30, while the value of their investments shrank to $79.72 million from $197.77 million during the three-month period. Joel Greenblatt’s Gotham Asset Management reported owning 561,321 shares in RetailMeNot Inc. (NASDAQ:SALE) through its 13F filing for the September quarter.
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