Warren Buffett Sells Shares of Verisign Inc. (VRSN), Plus Two Other Noteworthy Hedge Fund Moves

Just because a billionaire channels a big chunk of cash into a certain stock does not necessarily mean that retail investors should do so as well. Nonetheless, numerous small-scale investors tend to follow what billionaires and prominent hedge fund managers are buying or selling, and rightly so. It does pay off to know what some of the greatest minds in the finance industry think about certain companies (even though they may be wrong on some occasions), which is why Insider Monkey closely monitors the trading activity of high-profile investors such as Warren Buffett, Carl Icahn, and other hedge fund managers. For that reason, the following article will examine three SEC filings recently submitted by revered investor Warren Buffett and two other successful hedge fund vehicles.

At Insider Monkey, we track around 785 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 more details about our small-cap strategy).

The Oracle of Omaha Sells Shares of Verisign

According to a fresh Form 4 filing, Warren Buffett’s Berkshire Hathaway sold 32,255 shares of Verisign Inc. (NASDAQ:VRSN) on Friday at prices that ranged from $87.13 to $91.81 per share. After the recent sale, Mr. Buffett’s holding company currently owns 12.95 million shares of Verisign, which account for 11.94% of the company’s outstanding shares. Although the sale is not overly significant, the simple fact that the billionaire investor is selling shares seems surprising considering that he is “almost always a buyer of stocks”. The global provider of domain name registry services and Internet security has seen its market value gain 138% over the past five years and 38% in the past year alone.

Verisign Inc. (NASDAQ:VRSN) had nearly 143 million names in the domain name base for .com and .net at the end of March, and the number of domain names registered could continue to grow due to strong growth in online advertising, e-commerce, and the number of Internet users. However, the company’s financial performance may be weighed down by the strong competition from country code top-level domains (ccTLDs), which are two-letter Internet top-level domains designated for particular countries, and new generic top-level domains (gTLDs). The company’s revenue for the first quarter was $281.88 million, an increase from $258.42 million in the first quarter of 2015. The increase in the company’s top-line figure was mainly driven by an increased domain base for .com and .net and an increase in .net domain registration fees.

The shares of Verisign are trading at a forward P/E ratio of 22.9, significantly above the multiple of 16.2 for the Information Technology sector. Ken Fisher’s Fisher Asset Management owns a mere 2,496 shares of Verisign Inc. (NASDAQ:VRSN) as of March 31.

Let’s head to the next two pages of this article, where we will discuss two separate SEC filings.

Activist Investment Firm Takes Some Profits off the Table from Successful Investment in Six Flags

In a separate Form 4 filing, Rehan Jaffer’s H Partners Management LLC reported selling 175,000 shares of Six Flags Entertainment Corp (NYSE:SIX) on Friday, at prices varying between $59.90 and $60.10 per share. H Partners currently owns 14.46 million shares of Six Flags, which make up 15.50% of the company’s outstanding shares. The largest regional theme park operator in the world entered into bankruptcy protection in June 2009, surrendering to a mix of long-term indebtedness and swelling losses from operations. However, the company emerged from bankruptcy in May 2010 and H Partners has played an important role in the company’s subsequent turnaround story. Six Flags Entertainment Corp (NYSE:SIX)’s shares have returned an impressive 527% since May 2010 and 25% in the past year alone, so it is no wonder why the activist investment firm is selling shares.

The company currently owns and operates 18 theme and water parks, of which 16 are located in the United States, one in Mexico, and one in Canada. In February, the company revealed plans to open and operate a water park in Mexico that has been closed for several years, with plans to open it to the public in early 2017. Six Flags intends to invest $15 million-to-$18 million in the property, in addition to the company’s original plan of spending 9% of annual revenue on capital expenditures during 2016.

Six Flags shares are currently changing hands at around 28.2-times expected earnings, above the forward P/E multiple of 14.8 for the movies and entertainment sector and the ratio of 17.7 for the S&P 500 gauge. Joel Greenblatt’s Gotham Asset Management acquired a new stake of nearly 656,000 shares of Six Flags Entertainment Corp (NYSE:SIX) during the December quarter.

Canyon Capital Targets Ambac’s CEO and Board Compensation

In a fresh SEC filing, Canyon Capital Advisors LLC, founded by Joshua Friedman and Mitchell Julis, released a compensation analysis of Ambac Financial Group Inc. (NASDAQ:AMBC)’s President and Chief Executive Officer, Nader Tavakoli, and the company’s Board of Directors, based on the work of widely-known compensation expert Brian T. Foley. Canyon Capital has put mounting pressure on the U.S bond insurer to accelerate the settlement of $2 billion in insurance claims, as the credit-focused hedge fund has debt positions in securities issued or insured by Ambac worth roughly $376 million. Simultaneously, the fund’s 2.2 million-share equity position is worth a mere $34.67 million.

Going back to the aforementioned compensation analysis, some of Mr. Foley’s findings conclude that Mr. Tavakoli’s direct compensation of $5.77 million in 2015 “was on the high end of the compensation of highest paid executives at the companies Ambac itself has identified as its peers for compensation purposes”. Moreover, those findings also suggest that Ambac Financial Group Inc. (NASDAQ:AMBC)’s full-year Board members were each paid “more than 2.70 times the median rate, more than double the 75^th percentile rate, and approximately 1.65 times the 90^th percentile rate for board members at Ambac’s Chosen Peers”. Canyon Capital, which has attacked Mr. Tavakoli’s compensation on multiple occasions, seeks the support of shareholders to vote for its director nominee, Frederick Arnold, at the company’s upcoming meeting of shareholders to replace current Chairman Jeffrey Stein.

Ambac shares have advanced by 12% since the beginning of 2016, but are down by 29% over the past 12 months. Andy Redleaf’s Whitebox Advisors trimmed its stake in Ambac Financial Group Inc. (NASDAQ:AMBC) by 61% during the March quarter, ending the three-month period with 242,569 shares.

Disclosure: None