In Monday trading news, TeleCommunication Systems Inc. (NASDAQ:TSYS), KaloBios Pharmaceuticals Inc. (NASDAQ:KBIO) and Peabody Energy Corp. (NYSE:BTU) all made big gains on heavy trading volumes following separate merger and sales agreements, while Mallinckrodt Public Ltd. Co. (NYSE:MNK) was sparking positive vibes after growing its net sales during the latest quarter. Let’s look deeper into today’s news as well as look at what the investors from our database think about these stocks.
Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by more than 53 percentage points since the end of August 2012. These stocks returned a cumulative of 102% vs. a 49% gain for the S&P 500 Index (read the details). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).
TeleCommunication Systems Inc. (NASDAQ:TSYS) rallied by 12.53% after striking an agreement that will see the company sell itself for approximately $430.8 million in enterprise value. Comtech Telecommunications Corp. (NASDAQ:CMTL), whose shares dropped by 6.31% on Monday, will acquire TeleCommunication Systems for $5 per share, expecting that the deal will be accretive during the first year as a combined company. The acquisition is expected to bring in approximately $8.0 million in the first year following the closing and $12.0 million in the second year, the companies said.
By the end of September, 12 funds out of the 730 in our database held 19.50% of the outstanding stock of TeleCommunication Systems. Top investor Becker Drapkin Management held 3.38 million shares of the company at the end of September, valued at $11.6 million.
Meanwhile, 11 funds in our database held 17.10% of Comtech’s outstanding stock on September 30. First Eagle Investment Management held 1.63 million shares of the company valued at $33.5 million.
KaloBios Pharmaceuticals Inc. (NASDAQ:KBIO) skyrocketed by another 116.44% after monster trading days on Thursday and Friday of last week that have seen its shares soar by over 1,800%. The biopharmaceutical company, which was in dire straits, sold 70% of its outstanding shares to an investor group led by Turing Pharmaceuticals AG Founder and CEO Martin Shkreli, who will also run KaloBios as its new CEO and Chairman of the Board. KaloBios received at least $3.0 million in equity backing from Shkreli and other investors on top of a $10 million facility for equity financing. The new CEO also expressed positivity regarding KaloBios’ lenzilumab, to treat rare and orphan diseases. “Lenzilumab has particular promise in Chronic Myelomonocytic Leukemia (CMML), a disease with no FDA-approved treatment options and a 3-year overall survival rate of 20%,” Shkreli said.
As of the end of September, Renaissance Technologies held 3.30% of the outstanding stock of KaloBios, valued at $259,000 at that time (now significantly more).