The M&A space is widely followed by investors, since these transactions usually unlock significant shareholder value and many major funds have merger arbitrage as one of their primary strategies. On Monday, four stocks have jumped on M&A-related news, while one gained ground for another reason. Without any further ado, let’s take a look at the five stocks that make the list of the top gainers in Monday morning trading.
Due to the fact that many hedge funds and other large investors have merger arbitrage as one of their strategies, following their activity can provide some insights for retail investors as well. That’s what we are doing at Insider Monkey, although our focus is a bit different. We are more interested in a certain type of hedge funds’ long picks, namely small-cap companies, which we believe can provide market-beating returns over the long-term due to the fact that they are priced less efficiently and are not so widely followed by the market. Our strategy involves imitating the 15 most popular small-cap ideas among over 700 of the best-performing investors and it has returned 102% since August 2012, beating the S&P 500 ETF (SPY) by some 53 percentage points (see more details here).
Let’s start with Pep Boys-Manny Moe and Jack (NYSE:PBY), whose stock jumped by more than 23% after the bell on the back of the announcement that it will be acquired by Bridgestone for $15 per share, or $835 million in aggregate. The stock has advanced by over 52% year-to-date, amid the company saying that it planned to sell itself. Overall, a total of 16 funds from our database held shares of Pep Boys-Manny Moe and Jack (NYSE:PBY), equal to over 18% of its outstanding stock. Among them, Mario Gabelli‘s GAMCO Investors, which often bets on companies that have the potential to be acquired, holds the largest stake in Pep Boys-Manny Moe and Jack (NYSE:PBY) as of the end of September, among those funds we track which have filed for the period. Gabelli’s holdings contains 6.83 million shares. Moreover, billionaire quants led by Israel Englander, Jim Simons, and Ken Griffin boosted their positions substantially during the second quarter.
Then there are Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) and Qunar Cayman Islands Ltd (NASDAQ:QUNR), both of which are trading higher today after both companies, which represent two of the largest China-based online travel agents, agreed to combine their operations. The partnership will create the largest Chinese online travel network. Another stock that was dragged higher on the back of the same news is Baidu Inc (ADR) (NASDAQ:BIDU), which owns a majority stake in Qunar Cayman Islands. Under the terms of the share swap agreement, Baidu will hold a 25% stake in Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP), and Ctrip will hold 45% of the total voting rights in Qunar. Among the funds from our database, Baidu Inc (ADR) (NASDAQ:BIDU) was the most popular at the end of June, as 70 funds held shares of the company, while in Qunar and Ctrip, 29 funds and 52 funds disclosed long positions in the previous round of 13F filings, respectively. An investor that held stakes in all three companies at the end of June was billionaire Andreas Halvorsen‘s Viking Global. During the second quarter, Viking halved its stake in Baidu Inc (ADR) (NASDAQ:BIDU) to 1.29 million shares, but increased its positions in Qunar and Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) by 150% and 36% respectively, to 2.53 million shares and 5.76 million shares.
The following page will discuss BioDelivery Sciences International, Inc. (NASDAQ:BDSI) and the news that led to its stock gaining ground today.