Carl Icahn Can’t Stop Buying Cheniere; Nelson Peltz Boosts Stake In SYSCO

Most individual investors already know the value of monitoring activist investors, who generally make value-enhancing proposals or push for changes at struggling companies in order to unlock shareholder value. Activist hedge funds are the few financial vehicles that do have a strong and consistent track record of beating the broader market even amid the equities bull-run we have experienced over the past several years. Indeed, this is one of the primary reasons the Insider Monkey team tracks and reports the moves made by activists on a daily basis. With this in mind, this article will discuss a bunch of filings submitted by two famous activist investors and one occasional activist monitored by our team.

At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 102% and beating the market by more than 53 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.

In a Form 4 filing with the SEC, Nelson Peltz’s Trian Partners reported purchasing 613,221 shares of SYSCO Corporation (NYSE:SYY) this week at prices in the range of $40.57 to $41.30 per share, boosting Trian’s overall holdings in the company to 42.68 million shares. The well-known activist fund reported owning 41.41 million shares in SYSCO in the latest round of 13Fs. The marketer and distributor of foodservice products delivered modest revenue growth in the first quarter of its fiscal 2016, which was hindered by cost deflation and negative impact of foreign currency translation. Although the U.S. consumer confidence has been on a rise and the labor market has been tightening lately, the foodservice market has been experiencing a modest level of growth, which has resulted in competitive pricing pressures. SYSCO Corporation (NYSE:SYY) reported sales of $13 billion for the first quarter of fiscal 2016, up by 0.9% year-on-year. Its adjusted net earnings climbed 0.9% on the year to $312 million. Meanwhile, shares of SYSCO are up by nearly 4% since the beginning of the year and are trading at a rather expensive trailing price-to-earnings ratio of 37.72, which is significantly above the average of 22.71 for the S&P 500 Index.

A total of 30 funds from our database were invested in SYSCO at the end of the third quarter, amassing 14.90% of the company’s outstanding common stock. These investors owned $3.45 billion worth of shares on September 30. Although the number of smart money investors with positions in the company increased by one quarter-over-quarter, the value of their investments grew by a whopping 56%. Jim Simons’ Renaissance Technologies acquired a 3.49 million-share stake in SYSCO Corporation (NYSE:SYY) during the third quarter.

Let’s head to the next page of this article, where we discuss two separate filings submitted by Camber Capital Management and Icahn Enterprises.

According to a separate Form 4 filing, Stephen Dubois’s Camber Capital Management snapped up 791,565 shares of Sequenom Inc. (NASDAQ:SQNM) so far this week at a weighted average price of $1.30. After the recent purchases, the healthcare-focused fund holds 16.19 million shares in the life sciences company. The company mainly develops and markets molecular diagnostics testing services targeting the women’s health market. Specifically, its wholly-owned subsidiary, Sequenom Laboratories, offers molecular-based laboratory developed tests, with a primary focus on prenatal testing. The company’s financial performance is correlated with the total number of accessions (each test performed is related to a patient specimen that is commonly called accession), which has been on a steady decline recently. The number of accessions dropped by 8,400 or 5.7% for the nine-month period that ended September 30, relative to the same period of the last year. At the same time, Sequenom Inc. (NASDAQ:SQNM)’s management anticipates that the number of accessions will continue to decline in the upcoming quarters, as other companies choose to use their own noninvasive prenatal testing.

The stock is down by 63% so far in 2015, and it is not entirely clear what can stop the stock’s downfall. The number of smart money investors with positions in the company declined to 11 from 13 during the September quarter, while the value of these positions dropped to $47.94 million from $79.94 million. Funds tracked by Insider Monkey owned 23.10% of the company’s outstanding common stock on September 30. William Leland Edwards’ Palo Alto Investors held its position in Sequenom Inc. (NASDAQ:SQNM) unchanged during the third quarter at 10.02 million shares.

Looks like billionaire activist Carl Icahn can’t stop buying shares of Cheniere Energy Inc. (NYSEMKT:LNG). As stated in a Form 4 filing, the activist investor purchased a 30,819 share-block on Tuesday at a price of $41.84 per unit, lifting his overall holding in Cheniere to 32.68 million shares. The sustained supply glut of liquefied natural gas (LNG) has put significant weight on prices over the past year or so, with the price of Asian LNG declining to $7.20 per million British thermal units. At the same time, the prices of LNG spot cargoes that arrived in Japan (the largest buyer of LNG in the world) last month averaged $7.50 per mmBtu, which compares with the average of $7.90 per mmBtu recorded in October. Meanwhile, shares of Cheniere Energy Inc. (NYSEMKT:LNG) are 38% in the red year-to-date, but Carl Icahn keeps buying more stock. Although it is hard to predict when the LNG supply glut will start to fade away, the reputable investor has the time and capital at his disposal to endure the current low commodity-price environment.

A total of 62 hedge funds from our database had positions in Cheniere at the end of the third quarter, down from 76 funds a quarter earlier. Similarly, the value hedge funds’ investments in the company declined to $7.12 billion from $9.01 billion. Even so, these top money managers stockpiled a whopping 62.30% of the company’s shares at the end of September. Aside from Carl Icahn, billionaire Seth Klarman of Baupost Group also holds a sizable stake in Cheniere Energy Inc. (NYSEMKT:LNG), which is comprised of 22.67 million shares as of September 30.

Disclosure: None