Three Hedge Fund Moves Ahead Of Holidays

Many believe that the end of the near-zero interest rate era will put some weight on U.S. equities, which might give hedge funds a change to prove their stock picking abilities once again. Although the low interest rate environment will most likely stick around for quite some time, it would be worthwhile to look how hedge funds and other investors adjust their investment strategies and decisions after the recent rate hike. Tracking hedge funds’ moves should represent a key part of one’s stock analysis process, as it pays to know what the most financially-educated and bright minds of the finance world think of certain companies. For that reason, this article will discuss three filings submitted with the SEC by several hedge funds tracked by the Insider Monkey team.

At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 102% and beating the market by more than 53 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.

According to a Schedule 13D filing, Scopia Capital Management, founded by Matt Sirovich and Jeremy Mindich, owns 3.26 million shares in Itron Inc. (NASDAQ:ITRI), accounting for 8.6% of the company’s outstanding common stock. Scopia Capital reported owning 1.92 million shares in the company through its 13F filing for the September quarter. It should be mentioned that Scopia Capital and Jerome Lande’s Coppersmith Capital Management teamed up in September to launch their activist campaign on Itron Inc. (NASDAQ:ITRI), and currently own a group stake of 6.11 million shares. On December 10, the technology and services company announced a cooperating agreement with both Coppersmith Capital and Scopia Capital, under which Jerome Lande and Peter Mainz, a candidate identified by Coppersmith, were added to the company’s Board of Directors. The company also formed a Value Enhancement Committee “to review, study and develop potential initiatives (including transactions) designed to create durable, sustainable long-term shareholder value”. The technology company that offers end-to-end smart metering solutions to electric, natural gas, and water utilities reported revenues of $1.4 billion for the nine months that ended September 30, as compared to $1.5 billion reported a year ago. The company’s top-line figure was mainly impacted by foreign exchange rates, as revenues increased by $66.7 million year-over-year on a constant currency basis. Shares of Itron are nearly 15% in the red this year, so it remains to see whether the aforementioned hedge funds will achieve success in creating shareholder value. A number of 16 hedge funds from our database were invested in the company at the end of the third quarter, stockpiling 16.40% of its outstanding shares. Ian Simm’s Impax Asset Management owns 1.22 million shares in Itron Inc. (NASDAQ:ITRI) as of September 30.

The second page of this article will discuss two separate filings submitted by Sandell Asset Management and Kingdom Ridge Capital.

In a separate 13D filing, Sandell Asset Management, founded by Tom Sandell, reported owning 4.01 million shares (including 375,536 shares referenced in cash-settled equity swaps) in Viavi Solutions Inc. (NASDAQ:VIAV), representing 1.7% of the company’s outstanding common stock. As a result, Tom Sandell’s investment firm ceased to be an owner of more than 5% of outstanding stock in Viavi Solutions. This compares with the 12.00 million-share stake (which included 6.00 million shares underlying stock options and 375,526 shares referenced in cash-settled equity swaps) revealed via another 13D filing in early October. At the end of September, the network-testing equipment company and the activist hedge fund firm sealed a settlement agreement, under which Donald Colvin and Tor Braham were appointed to the company’s Board of Directors. At the same time, the Board’s Corporate Development Committee, which is comprised of four directors (the freshly-appointed Directors are two of them), was set to review strategies that could create value, which include a review of the company’s “business, financial position, capital allocation, investment and business strategies, and strategies to maximize the value of the company’s deferred tax assets”.  Under the aforementioned standstill pact, Viavi Solutions Inc. (NASDAQ:VIAV) was also expected to immediately implement an accelerated share repurchase program and change the equity incentive program. In the meantime, 19 smart money investors from our database had stakes in the company on September 30, accumulating 18.20% of its outstanding shares. George Soros’ Soros Fund Management reported owning 10.47 million shares in Viavi Solutions Inc. (NASDAQ:VIAV) via its latest 13F.

As stated by a Schedule 13G filing, Kingdom Ridge Capital, managed by Christopher Zepf and Brian Thonn, owns nearly 2.55 million shares of Immersion Corporation (NASDAQ:IMMR), representing 9.00% of its outstanding stock. Kingdom Ridge reported ownership of 1.42 million shares in the company through the latest round of 13Fs, along with call options underlying an additional 690,000 shares. The intellectual property and software licensing company has seen its shares climb by 20% this year even though the stock has embarked on a sharp downtrend since early December. The company primarily focuses on creating, designing and licensing patented haptic innovations and software that enable people “to use their sense of touch more fully when operating a wide variety of digital devices”, having over 2,000 issued and pending patents in the nation and other countries. Immersion Corporation (NASDAQ:IMMR)’s total revenue for the third quarter increased by 19% year-on-year to $14.31 million, thanks to higher revenues from its mobility and gaming licenses. The company also raised its 2015 revenue guidance to the range of $59-to-$61 million, which denotes an increase of 11%-to-15% year-over-year. Meanwhile, the company’s net income for the quarter added up to $184,000, increasing from $1.1 million reported a year ago. The number of hedge funds with positions in the company declined to 21 from 22 during the third quarter, while the value of their investments shrank to $131.94 million from $144.75 million. Richard Mashaal’s Rima Senvest Management cut its position in Immersion Corporation (NASDAQ:IMMR) by 2% during the July-to-September period to nearly 4.45 million shares.

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