All three indexes are slightly lower in the pre-market today after the Labor Department reported that nonfarm payrolls increased 38,000 versus the 160,000 that many analysts were expecting. Nevertheless, there was a case for optimism as the unemployment rate fell to 4.7%, one of the lowest in a long time. Among the stocks buzzing this morning are Northstar Realty Finance Corp (NYSE:NRF), NorthStar Asset Management Group Inc (NYSE:NSAM), Colony Capital Inc (NYSE:CLNY), General Motors Company (NYSE:GM), and Talen Energy Corp (NYSE:TLN). Let’s find out why each stock is in the spotlight and see how the smart money feels about the five companies.
At Insider Monkey, we track around 730 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on, can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see the details here).
A Mega-Merger in the REIT Sector
In an all-stock deal, Northstar Realty Finance Corp (NYSE:NRF), NorthStar Asset Management Group Inc (NYSE:NSAM), and Colony Capital Inc (NYSE:CLNY) are combining in a three-way merger to form Colony Northstar. Under the terms of the deal, which should close in the first quarter of next year, Northstar Realty Finance Corp (NYSE:NRF) shareholders will own 33.9% of the combined company, NorthStar Asset Management Group Inc (NYSE:NSAM) shareholders will own 32.25%, and Colony Capital Inc (NYSE:CLNY) shareholders will own 33.25%. In addition, NorthStar Asset Management Group’s shareholders will get a special one-time dividend of $128 million. Management of the three companies expect to realize $115 million in annual cost savings from the combination, and bulls of NorthStar hope that the merger will help narrow the difference between its stock price and its net asset value of around $24 a share.
Under share specific terms, Northstar Realty Finance shareholders will receive 1.0996 shares of the new combined company for each share of Northstar Realty they own, NorthStar Asset Management shareholders will receive one share of the new company for each share of NorthStar Asset Management they own, and Colony Capital shareholders will receive 1.4663 shares of the new entity for each share of Colony they own. Colony Capital and Northstar Finance are each up 2% while NorthStar Asset Management is up 4% on the news.
Of the 766 elite funds in our database, 38 funds owned shares of Northstar Realty Finance Corp, 53 were long NorthStar Asset Management, and 31 were long Colony Capital at the end of the first quarter.
On the next page, we examine General Motors Company, and Talen Energy Corp.