Editor’s Note: Related tickers: Virgin Media Inc. (NASDAQ:VMED), Liberty Global Inc. (NASDAQ:LBTYA), Arbitron Inc. (NYSE:ARB), Nielsen Hldg NV (NYSE:NLSN), SemGroup Corp (NYSE:SEMG), Chesapeake Energy Corporation (NYSE:CHK), Sprint Nextel Corporation (NYSE:S), DISH Network Corp. (NASDAQ:DISH), DineEquity Inc (NYSE:DIN)
Halcyon Asset Management is managed by John Bader and is multi-strategy hedge fund specializing in the credit, merger, and special situations fields.The fund recently filed its 13F with the SEC, describing some of its main investments during 2013’s first quarter. It’s important to take a look at the fund’s favorite holdings, because research has shown that retail investors can benefit from watching hedge fund sentiment; discover the details of this strategy.
The top five
The fund’s largest equity holding declared in the 13F is in telephone and Internet company Virgin Media Inc. (NASDAQ:VMED), consisting of 1,468,121 shares worth $71.894 million at the time of filing. This position seems to be initiated during the quarter, as there is no listing of it in the prior 13F. Virgin Media Inc. (NASDAQ:VMED) has been in a substantial uptrend for the past year, more than doubling in price, and is trading at $51.18, near the 52-week high, at the time of writing. The company reported revenue of 1,043 million and operating income of$150 million during first quarter of 2013.More importantly, Liberty Global Inc. (NASDAQ:LBTYA) has recently acquired Virgin Media Inc. (NASDAQ:VMED), and so it is likely to be delisted from the NASDAQ, as the London Stock Exchange (LSE) has recently announced a similar move.
Next up for consideration is the consumer research company Arbitron Inc. (NYSE:ARB), with 1,162,946 shares held, worth $54.507 million, as of the time of the 13F filing. This is a substantial increase in stake size from the prior quarter, with only 343,481 shares held by the fund on December 31, 2012. Arbitron Inc. (NYSE:ARB)’s price action has been flat during 2013, following a massive gap up in mid-December 2012, and is currently trading near $47, still very close to its 52-week high. The gap up was in response to the announced acquisition by Nielsen Hldg NV (NYSE:NLSN) on December 18, 2012. Arbitron Inc. (NYSE:ARB) reported net income for the 2013 first quarter at $16.3 million or $0.60 per share (diluted), compared with $17.8 million, or $0.64 per share (diluted), for the corresponding quarter of 2012.
The next largest equity holding of the fund is in oil and gas transporter SemGroup Corp (NYSE:SEMG). Price action for this stock during 2013 has been impressive, trading from $40 in January to very close to its 52-week high at $55.28, as of the time of writing.During 2013’s first quarter, SemGroup Corp (NYSE:SEMG) reported revenue of $287.7 million with net income of $43.4 million, working out to $1.03 per diluted share, compared with revenue of $315.8 million, with net income attributable of $21.1 million, or $0.50 per diluted share, for the fourth quarter of 2012.
Shares aren’t particularly cheap, but earlier this month, the company bought Mississippi Lime Midstream assets from Chesapeake Energy Corporation (NYSE:CHK); it’s intriguing to see an investor betting on the other side of Chesapeake’s asset sale program. Generally speaking, however, SemGroup Corp (NYSE:SEMG)’s purchase should boost investor optimism, and further reward shareholders.
Next up is wireless network operator Sprint Nextel Corporation (NYSE:S). The 13F has the fund holding 6,755,811 shares worth about $42 million at the time of filing; this is a moderate increase in stake from the prior quarter, when just above 6 million shares were reported to be held. Price action for this stock has been very bullish, trading up from $2.32 about a year ago to $7.25 as of the time of this writing. During the first quarter of 2013, the company reported operating income of $29 million, bringing its adjusted OIBDA to $1.5 billion, up over 25% year-over-year, the highest increase in more than six years. Sprint Nextel Corporation (NYSE:S) is caught in a three-way merger rumor with SoftBank and DISH Network Corp. (NASDAQ:DISH), though only one of the latter two will win. On the bright side, a bidding war will continue to push shares of Sprint Nextel Corporation (NYSE:S) higher in the meantime; this is a smart investment by Bader and Halcyon.
Rounding out the top five is restaurant operator DineEquity Inc (NYSE:DIN), with the fund reporting 563,690 shares worth $38.776 million. This seems to be another new position, initiated by the fund this quarter. Although price action for DineEquity Inc (NYSE:DIN) was very bullish in 2012, it seems to have consolidated in recent months, and is currently trading near the $72.50 mark. For 2013’s first quarter, adjusted net income was reported at $21.8 million, which works out to adjusted earnings per diluted share of $1.14. This compares to $24.6 million, or adjusted earnings per diluted share of $1.36, for the first quarter of 2012.
DineEquity Inc (NYSE:DIN)’s valuation is decently attractive, but one thing worth watching is fellow hedgie Scout Capital’s positioning in the company. Scout has taken an activist position in the company, and as of earlier this month now owns a 6.6% stake.
The fund has clearly made some successful trades during the past two quarters. Given Halcyon’s prior successful trades focusing on possible mergers and special situations, the recently opened position in restaurant operator Dine equity may be particularly worth watching. We’d also keep a close eye on Sprint Nextel Corporation (NYSE:S)’s merger merry go-round, SemGroup Corp (NYSE:SEMG) and its ability to integrate Chesapeake Energy Corporation (NYSE:CHK)’s assets into operations, and Arbitron Inc. (NYSE:ARB)’s action pre-merger—it’s expected to finalize this summer. Continue preparing for 13F-filing season here.