Some of the biggest recent news in the financial markets has been Carl Icahn’s taking a position in Netflix, Inc. (NASDAQ:NFLX). A combination of shares and call options has given the billionaire activist investor the potential to control 10% of the shares outstanding. Netflix’s international expansion and the accompanying costs have eliminated the profitability of the company’s streaming operations, according to its third quarter results, resulting in an 88% decrease in earnings from the third quarter of 2011. At nearly 200 times estimates of its 2013 earnings, we think that the company will have to make a big strategic move in order for its shares to pay off for investors. Read more about Icahn’s position in Netflix.
Billionaire Steven Cohen’s SAC Capital Advisors had about 150,000 shares of Goodrich Petroleum Corporation (NYSE:GDP) in its portfolio at the end of June, but has since increased its stake to a total of 1.9 million shares according to a recent filing. Goodrich is an exploration and production company which primarily operates in shale gas fields in the onshore U.S.; it is not yet making profits, so we would avoid it for now, but other traders may find it worth the risk upon researching the company further. Find out more about Goodrich and Cohen’s purchase. With SAC also buying shares of Plains Exploration & Production Company (NYSE:PXP) earlier in October, we wonder if Cohen and his team are getting bullish on oil and gas, and are also investing in larger companies where a similarly sized position would not trigger a filing. Plains had been focused on shale gas before its recent agreement to buy some of BP’s offshore assets in the Gulf. Plains trades at 10 times forward earnings estimates, and though we are waiting to see how successful that company is in selling some of its natural gas assets (which it must do to repay a loan used in the BP transaction) it might be a good value at that point.
Galt Investment Management disclosed a position of about 980,000 shares in Bravo Brio Restaurant Group, Inc. (NASDAQ:BBRG), a restaurant company which primarily operates Italian restaurants under the Bravo and Brio brands. It has a market capitalization of only $260 million, but on average 200,000 shares have traded per day over the last three months and the current price is over $13 per share. In its most recent quarter, Bravo Brio’s earnings were down 21% from the same period in 2011; however, the stock has dropped 32% in the last year and it now trades at 16 times trailing earnings, in line with other full-service restaurant companies. Wall Street analysts expect earnings growth in 2013, and so the forward P/E is 13. We think that we might prefer to invest in larger full-service restaurants that are trading at similar earnings multiples.
John Griffin’s Blue Ridge Capital has reported ownership of 1.8 million shares of Workday Inc (NYSE:WDAY), a recent IPO which at a market cap of $8 billion is up about 80% from its IPO price. Workday provides cloud-based applications for businesses to manage functions such as HR and payroll. The company’s revenue has been up strongly in recent quarters, and its net losses in its most recent quarter were almost entirely caused by R&D expenses. However, we still weren’t comfortable recommending a stock that didn’t have positive earnings; it could be a growth stock to keep an eye on, however, particularly if we start to see other funds trickling in. Learn more about Workday.
