Another Top-Tier Hedge Fund Acquires Stake in Square Inc. (SQ); Activist Jeffrey Ubben Boosts Stake in Oil Services Company & Other Moves

Hedge fund clients pulled out $15 billion from the hedge fund industry in the first quarter of 2016, marking the largest outflow since the second quarter of 2009. In the June quarter of 2009, hedge fund clients and investors pulled out a massive $43 billion from the industry. Meanwhile, analysts at JPMorgan believe that the hedge fund industry will experience a total outflow of more than $25 billion in 2016, as investors, particularly sovereign wealth funds, have become increasingly worried about the performance of hedge funds and their 2-and-20 payment structure. However, Canada’s largest pension scheme, which is the world’s eighth-largest retirement fund, does not plan to review its hedge fund investments, saying that hedge funds have contributed with “significant” value to the fund. Having this in mind, the following article will discuss several informative SEC filings submitted by several widely known hedge funds tracked by Insider Monkey.

At Insider Monkey, we track around 730 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).

Coatue Management Initiates New Stake in Promising Mobile Payments Company

According to a new Schedule 13G filing, Philippe Laffont’s Coatue Management LLC recently acquired a new stake of 1.90 million Class A shares of Square Inc. (NYSE:SQ), which account for 5.99% of the company’s outstanding common stock. The mobile payments company has been receiving more attention from the hedge fund industry in recent months, after the company completed its initial public offering (IPO) in late November at an IPO price of $9.00 per share. The company, co-founded by Twitter Inc. (NYSE:TWTR)’s CEO and co-founder Jack Dorsey, has seen its top-line figures grow at a high rate in the past several years. Square Inc. (NYSE:SQ) generates roughly 94% of its total net revenue from payment processing services, but the company’s software and data product segment, which includes Square Capital, seems well-positioned to grow notably in the upcoming years. Square Capital offers the company’s sellers a cash advance in exchange for a fixed share of their future receivables, but company plans to become a traditional online lender by offering loans to small businesses. Meanwhile, investors should be aware that Starbucks Corporation (NASDAQ:SBUX), a major client of Square, has announced intentions to transition to another payment processor, which will have a significant impact on the company’s top-line results. Daniel S. Och’s OZ Management also recently disclosed a new stake of 1.65 million Class A shares of Square Inc. (NYSE:SQ) (read more details).

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

Shareholder Opposes “Cascade of Transactions” Pursued by This Real Estate Operating Company

As revealed by a freshly-amended 13D filing, David J. Winters’ Wintergreen Advisers LLC  sent a letter to the independent directors of Consolidated-Tomoka Land Co. (NYSEMKT:CTO) on April 21, in which it expressed discontent with the company’s announcement of certain transactions. Wintergreen’s position in the diversified real estate operating company has not changed since we covered the holding last time and the fund currently owns 1.54 million shares of Consolidated-Tomoka, which make up a whopping 26.1% of the company’s outstanding stock.

In late November, Mr. Winters’ Wintergreen Advisors submitted a proxy proposal requesting Consolidated-Tomoka Land Co. (NYSEMKT:CTO)’s Board to hire or engage an independent advisor to evaluate means of maximizing shareholder value through the sale of the whole company or the “orderly” liquidation of its assets. Although the Board did not “take a position on the proposal”, the members of the boardroom formed a special committee to explore those alternatives presented by Wintergreen, as well as hired Deutsche Bank to serve as independent advisor to the special committee. However, Wintergreen believes that the management of Consolidated-Tomoka Land has hindered “Deutsche Bank’s ability to do its job” by announcing a number of transactions that include the sale of 16 income properties, subsurface mineral rights, pad sites, and additional land sales. As a result, Wintergreen believes that the Board must “put a halt to this ongoing cascade of transactions, and reaffirm its full and ongoing support for Deutsche Bank’s directive”. Clint Carlson’s Carlson Capital owned 107,604 shares of Consolidated-Tomoka Land Co. (NYSEMKT:CTO) at the end of 2015.

Forward Management Ups Stake in This REIT to 11.52%

In a Schedule 13G filing, Forward Management LLC, founded by J. Alan Reid Jr., reported ownership of 3.67 million shares of Ashford Hospitality Prime Inc. (NYSE:AHP), which constitute 11.52% of the company’s total amount of outstanding shares. This represents a massive increase from the stake of 35,000 shares disclosed in Forward’s 13F filing for the December quarter. Ashford Hospitality Prime mainly invests in high-revenue-per-available-room, luxury, upper-upscale and upscale hotels in gateway and resort locations. Just recently, the real estate investment trust announced that its Board completed a review of strategic alternatives announced in August, which also considered a possible sale of the company, dismissing a potential sale after receiving interest from various buyers. “…none of the indications were at levels that the independent directors, following consultation with their independent advisor, believed would provide adequate value to stockholders”, said Ashford Hospitality Prime Inc. (NYSE:AHP) in a statement earlier this month. Nonetheless, the Board did reveal plans to sell up to four of its assets that do not have “the RevPAR level and product quality consistent with the long-term vision” of the company, as well as commence a $50 million stock repurchase program and increase the quarterly cash dividend by 20% to $0.12 per diluted share. John Petry’s Sessa Capital had 2.33 million shares of Ashford Hospitality Prime Inc. (NYSE:AHP) in its equity portfolio at the end of December.

Friendly Activist Jeffrey Ubben Buys More Shares of This Oil Services Company

According to a newly-amended 13D, Jeffrey Ubben’s ValueAct Capital currently owns 39.32 million shares of Baker Hughes Incorporated (NYSE:BHI), which constitute 9.0% of the company’s outstanding common stock. This is up from the position of 23.25 million shares revealed in ValueAct’s previous 13D filing on the company, submitted with the SEC in early February. The public filing reveals that the friendly activist hedge fund acquired the shares of Baker Hughes because they seemed undervalued and represented an attractive investment opportunity. Moreover, Mr. Ubben’s investment firm intends to engage in discussions with the company’s Board members and management regarding value-enhancing opportunities, which may involve discussions about business, management, Board composition, operations, capital allocation, among other things. In November 2014, oil-services companies Halliburton Company (NYSE:HAL) and Baker Hughes Incorporated (NYSE:BHI) inked a merger agreement under which the former was set to acquire the latter in a stock-and-cash transaction. Under the terms of the merger, Baker Hughes shareholders were set to receive 1.12 shares of Halliburton and $19.00 in cash for each share of Baker Hughes. The deal between the second-largest and third-largest players in the oil services industry has been facing strong opposition from the U.S. Department of Justice (DOJ), which said the merger eliminates head-to-head competition in 23 products and services. D.E. Shaw & Co., founded by billionaire David E. Shaw, owned 5.19 million shares of Baker Hughes Incorporated (NYSE:BHI) on December 31.

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