Stephen Feinberg just cannot keep his hands off of Pacific DataVision Inc (NASDAQ:PDVW)‘s shares. In its latest filing with the Securities and Exchange Commission, Feinberg and his fund, Cerberus Capital Management, have reported another increase to their stake in the company, of 38,917 shares at prices varying between $31.49 and $31.96 per share, lifting its holding to 3.29 million shares or 23.1% of the company’s common stock. So, why has he gone on this buying spree?
Founded in 1992 by Feinberg and William Richter, currently a senior managing director at the fund, Cerberus Capital Management has grown to control more than $25 billion in assets. The fund’s public equity portfolio carries a market value of $1.36 billion spread between ten stocks, most of them from the finance industry. Feinberg’s biggest bet continues to be in Ally Financial Inc (NYSE:ALLY), with Cerberus holding 41.5 million shares valued at $931 million, according to the fund’s latest 13F filing. Its second-biggest investment and also a new addition to its portfolio during the second quarter is American Capital Agency Corp. (NASDAQ:AGNC). Feinberg built a position that comprises 9.66 million shares valued at $177 million as of June 30.
Follow Stephen A. Feinberg's Cerberus Capital Management
Most investors can’t outperform the stock market by individually picking stocks because stock returns aren’t evenly distributed. A randomly picked stock has only a 35% to 45% chance (depending on the investment horizon) to outperform the market. There are a few exceptions, one of which is when it comes to purchases made by corporate insiders. Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012. We have been forward testing the performance of these stock picks since the end of August 2012 and they have returned 118% over the ensuing 35 months, outperforming the S&P 500 Index by over 60 percentage points (read the details here). The trick is focusing only on the best small-cap stock picks of funds, not their large-cap stock picks which are extensively covered by analysts and followed by almost everybody.
A developer of wireless communication solutions, Pacific DataVision has seen its stock decline by more than 20% since its Initial Public Offering in February of this year. Based on yesterday’s closing price of $30.69, the company has a market cap of $437 million. For the three months ending June 30, 2015, the company posted revenues of $840,000 and a loss per share of $0.32. This can be explained by the fact that the company is currently deploying its advanced digital dispatch networks and has included the costs related to these operations into its financial report. The revenue, however, accounts only for the income streams generated by its software business. For the current quarter, market analysts expect Pacific DataVision to register $700,000 in revenues and a loss of $0.38 per share.
“Our recent results continue to reflect the Company’s forward momentum toward achieving its business imperatives on all fronts […] In the near term, the success of our DispatchPlus launch in Houston along with the activity in other markets such as Dallas, Philadelphia and Atlanta, has given us confidence that the estimates of capital required for the buildout of our market areas are in line with the results achieved to date. In addition, although it is very early in the market development process from a sales perspective, we are pleased with the initial feedback from dealers, prospects and customers,” commented John Pescatore, the company’s Chief Executive Officer.
Jeffrey Altman, the manager of Owl Creek Asset Management, also has high hopes for Pacific DataVision Inc (NASDAQ:PDVW), having recently increased his holding of the stock by roughly 200,000 shares to amass 1.68 million shares of the company.
Disclosure: None
