Select companies such as Pinnacle Foods Inc. (NYSE:PF), Boulder Brands Inc. (NASDAQ:BDBD), Palo Alto Networks Inc. (NYSE:PANW), SunEdison Inc. (NYSE:SUNE) and TerraForm Global Inc. (NASDAQ:GLBL) have produced mixed sentiment from the market today in the face of mergers, asset sales and earnings reports. We’ll take a closer look at the news and see how the funds from our database have been trading them of late.
Why do we track hedge fund activity? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect their activity. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period hedge funds’ top small-cap stocks edged the S&P 500 index by double digits annually. The 15 most popular small-cap stock picks among hedge funds also bested passive index funds by around 53 percentage points over the 38 month period beginning from September 2012 (read the details here).
Pinnacle Foods Inc. (NYSE:PF) has fallen by 2.99% after it agreed to buy all of the outstanding shares of Boulder Brands Inc. (NASDAQ:BDBD) at $11 per share, in a transaction valued at approximately $975 million, including approximately $265 million of net debt. Colorado-based Boulder Brands Inc. (NASDAQ:BDBD), which has rallied by 8.44% to approach the per share purchase price, will bring in a pipeline of trademarked brands that cater to a younger target market than those of Pinnacle’s. In return, the transaction is expected to grow Boulder’s 2015 consensus adjusted EBITDA by approximately 50%, according to a Form 8-K filed today. Pinnacle Foods Inc. (NYSE:PF) will execute the acquisition by using cash on hand and new debt. Following the closing of the deal, which is expected in the first quarter of 2016, Boulder’s headquarters will be retained.
By the end of September, 37 out of the 730 funds in our database held 22.80% of Pinnacle’s outstanding stock. Top investor Soroban Capital Partners holds 5.39 million shares of the company valued at $225 million.
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Meanwhile, 17 funds in our database held 37.80% of Boulder’s outstanding stock. Adage Capital Management holds 6.11 million shares valued at $50.02 million.
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Palo Alto Networks Inc. (NYSE:PANW) has jumped by 5.23% today after reaping solid returns for its fiscal first quarter of 2016. Most notably, the company posted 55% year-over-year growth in total revenue to pull in a record $297.2 million. The company reported non-GAAP net income of $31.6 million, or $0.35 per share, compared with non-GAAP net income of $12.8 million, or $0.15 per share, for the fiscal first quarter of 2015.
“We had a very strong start to fiscal year 2016 that included achieving our highest fiscal first quarter revenue and billings year-over-year growth rates since going public,” Palo Alto Networks President and CEO Mark McLaughlin said.
Palo Alto Networks Inc. (NYSE:PANW) also provided its outlook for the second quarter of fiscal year 2016, predicting total revenue in the range of $314-to-$318 million and diluted non-GAAP earnings per share in the range of $0.38-to-$0.39 based on 91 million shares-to-92 million shares being in circulation. 47 funds in our database held 6.30% of the company’s outstanding stock at the end of September. Citadel Investment Group holds 75 million shares of the company, valued at $122.3 million.
