Hedge Funds Bought and Sold These Stocks Recently
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Hedge funds that take a large percentage stake in public companies, or then change the size of their stake in the future (including by selling shares) file 13D or 13G documents with the SEC so that their ownership is public knowledge. At Insider Monkey, we track these filings and while investors cannot invest or divest in every position this activity can serve as a good starting point for further analysis. We have gone through some of the filings for the last week and here are some stocks hedge funds have been buying and selling recently:
Billionaire Steven Cohen’s SAC Capital Advisors took a large stake in Magellan Health Services Inc (NASDAQ: MGLN), a $1.4 billion market cap company which serves insurance companies. SAC owned 1.4 million shares at the time of the filing, putting it right about at the 5% mark that triggers a filing. Magellan could be a value candidate, trading at 13 times trailing earnings and 12 times forward earnings estimates (though these multiples are not particularly low compared to the rest of the industry). Its beta of 0.7 indicates that it has at least some protection from a downside in the economy, and will not decline as much as the S&P 500 in a bear market (of course it would not rise as much as the index in a bull market, either). See further analysis of Cohen's purchase, including comparisons to peers such as UnitedHealth Group Inc. (NYSE: UNH). We found that UnitedHealth was impressively cheap, at trailing and forward P/Es of 11 and 10, respectively. The large insurer ($58 billion market cap, and now a component of the Dow Jones Industrial Average) has been adding subscribers and is widely owned by hedge funds. It may be a cheaper buy than Magellan.
Gates Capital Management had initiated a 2.2 million share position in Mercer International Inc. (NASDAQ: MERC) during the second quarter, and had increased the size of this position to 3.4 million shares by the middle of September. Mercer has a market capitalization of about $400 million and produces wood pulp which is then sold to manufacturers of paper products such as tissues. The stock price has a strong correlation to the broader market, carrying a beta of 3.9, though more recently it has underperformed a rising market (the stock is up only 1% over the last year). Wall Street analysts think that the company has good prospects to increase its earnings. Based on their estimates, its forward P/E is 7 even though the trailing P/E is about twice that figure. A number of investors like natural resources based on the prospect of continued growth in demand from the developing world, and that plus the fairly low earnings multiples work as a starting point for any bull case in the stock.
Thomas Claugus’s GMT Capital decreased the size of its position in Fushi Copperweld, Inc. (UNKNOWN: FSIN.DL) to 3.2 million shares from the 3.5 million shares it had owned at the end of June. Fushi Copperweld is a roughly $300 million market cap company (with about $3 million in average daily dollar volume over the last three months, giving it sufficient liquidity for most retail investors) which manufactures wires and cables for utility and transportation customers. The stock is up 96% over the last year, so we could see some of the fund’s sales being driven by profit-taking. However, the company has reported good numbers to the point where investors actually look skeptical of the company compared to the sell-side: its trailing P/E is 13, its forward P/E is 10, and the five-year PEG ratio according to analyst expectations is 0.8.
Healthcare-focused RA Capital Management, run by Harvard Ph.D. Peter Kolchinsky, reported ownership of 2.6 million shares of Sunesis Pharmaceuticals, Inc. (NASDAQ: SNSS). Sunesis is a development-stage biotech company whose best shot at a new drug is Vosaroxin. Vosaroxin is in various stages of clinical trials for different categories of patients suffering from acute myeloid leukemia. The $268 million market cap company began the year at below $1.50 per share but has risen dramatically over the course of 2012 and now trades at about $5.70 as the market expects progress towards FDA approval and drug marketing. A recent pop in the stock price, for example, was driven by the company’s announcement that it was expanding a phase 3 trial for Vosaroxin; this was seen as a sign that the study is seeing positive results and wants a larger sample size to improve statistical significance, particularly for subgroups of patients. RA Capital Management now owns 5.4% of the shares outstanding; earlier this month another fund, Visium, had filed with the SEC to declare ownership of 4.5 million shares.
We don’t have enough expertise to feel comfortable evaluating Sunesis ourselves, though healthcare-inclined investors may appreciate the upside on hedge fund activity. Fushi Copperweld’s numbers look good, but an investor would have to be comfortable pursuing an investment in a China-focused company. Magellan and Mercer look cheap, though Magellan might not be as good a buy as UnitedHealth or other peers and Mercer carries a good deal of market exposure.
This article is written by Matt Doiron and edited by Meena Krishnamsetty. They don't own shares in any of the stocks mentioned in this article. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.