Institutional fund managers were required to file their Q4 2012 investment holdings with the SEC no later than Thursday, February 14. While the financial media has been persistent combing through the filings of billionaire investors Carl Icahn and Bill Ackman, I’ve dedicated my time to smaller fund managers such as Karen Finerman that offer more digestible investment advice for the retail investor.
I’ll offer my brief opinion on Herbalife Ltd. (NYSE:HLF) before turning attention to Finerman’s activity for the fourth quarter.
One takeaway I will give readers regarding the Icahn/Ackman debate over Herbalife Ltd. (NYSE:HLF) is to recognize the financial discipline in which Icahn has quietly accumulated his Herbalife shares. Icahn’s 13-D filing reveals that the billionaire investor was scooping up shares of Herbalife on Christmas Eve as low as $25.72 per share. Icahn continued to buy shares in the $30 range and stated publicly on February 14 he has not purchased a single share of stock in the $40 range. Meanwhile, retail investors are piling in at significantly higher prices than Icahn paid himself.
Although I side with Ackman, ultimately I believe Herbalife management and Icahn will prevail. Ackman needs nothing short of an indictment of fraud from the Justice Department, and an investigation could take a significant amount of time to complete. If Ackman could have forced an injunction on Herbalife, he would have pursued this form of judicial process already. Icahn and Herbalife management could also take the company private. I advise readers to stay out of the Herbalife battleground, as news flow is unpredictable and therefore could have a negative effect on your trade.
Karen Finerman’s Recent Activity for Q4 2012
Value investor Karen Finerman is one of several money managers that I look forward to reviewing on a quarterly basis.
Readers may recognize Finerman from her frequent appearances on CNBC’s Fast Money financial talk show, held Monday – Thursday at 5 p.m. ET. I had the good fortune of watching the show live on July 20, 2010 in New York and meeting Ms. Finerman for a brief moment afterwards.
Here are a few notable changes Finerman made at her hedge fund during fourth quarter 2012:
GNC Holdings Inc (NYSE:GNC)
Metropolitan Capital Advisors purchased 29,100 shares of GNC during the fourth quarter. During the fall, GNC fell from a high of $40 in October to a low of $32 on November 16. A portion of the weakness was related to a secondary offering of 11.73 million shares of stock sold at $35.20 per share.
On February 14, GNC Holdings spiked higher by nearly 10% on heavy volume, following an earnings beat and strong guidance. The company reported an adjusted $0.50 EPS vs. $0.46 consensus and provided FY 2013 guidance of $2.75 – $2.80 vs. $2.72 consensus.
Analysts at Morgan Stanley hit the nail on the head heading into GNC’s recent fourth quarter results. On February 7, the firm reiterated its Outperform rating and $47 price target on the stock, when shares were trading near $36. Following the earnings release, shares closed at $40.60 on February 15 for a respectable gain.
Finerman gave GNC as her final trade on CNBC’s Fast Money as recently as February 13, preceding the company’s better-than-expected earnings announcement. Steve Grasso, another contributor on CNBC’s Fast Money, disclosed on the same date that his clients owned shares of GNC. This indicates to me that the hedge fund community continues to have preference for the name.
Shares of the nutritional supplements retailer have rallied 22% between January 1 and February 15.
SPDR S&P Biotech
Metropolitan Capital Advisors purchased 11,000 shares of the SPDR (“Spider”) S&P Biotech exchange-traded fund during the fourth quarter. In the past, Finerman has spoken about the secular bull market in biotechnology. However, she’s indicated her preference to reduce company-specific risk in the biotech sector by diversifying through a basket. The top three holdings in XBI are Regeneron Pharmaceuticals Inc (NASDAQ:REGN), Gilead Sciences, Inc. (NASDAQ:GILD), and Amgen, Inc. (NASDAQ:AMGN).
