Why J C Penney, American International Group & Others Are Trending on Monday?

Markets opened higher today, but started declining  after the announcement of manufacturing data, according to which the Institute for Supply Management’s (ISM) index of national factory activity fell to 50.8 in March from 51.8 in February, and was below the expected 51.4. Meanwhile, several stocks are making headlines today, including Halliburton Company (NYSE:HAL), Baker Hughes Incorporated (NYSE:BHI), Intercontinental Exchange Inc (NYSE:ICE), J C Penney Company Inc (NYSE:JCP) and American International Group Inc (NYSE:AIG). This article examines the reasons behind the movement in these stocks and sheds light on the hedge funds’ positions in them.

At Insider Monkey, we track around 785 hedge funds and other institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year (see more details about our small-cap strategy).

Halliburton and Baker Hughes Scrap Merger Deal

Halliburton Company (NYSE:HAL) and Baker Hughes Incorporated (NYSE:BHI) announced on Sunday that they had called off their proposed merger after resistance from the regulatory authorities of several countries. The $34.6 billion deal would have merged two of the biggest oil companies in the world. The merger had been part of Halliburton’s strategy to beat Schlumberger Limited. (NYSE:SLB) in terms of revenue, but the deal faced fierce resistance from regulatory circles in the US and Europe. Last month, the US Justice Department filed a lawsuit, challenging the merger, saying that it would result in a surge in oil prices and pose a threat to competition in the industry. In January, the European Commission announced its in-depth investigation of the proposed merger on competition concerns. After the deal is terminated, Baker Hughes Incorporated (NYSE:BHI) will get a $3.5 billion breakup fee from Halliburton Company (NYSE:HAL).

Among the funds we track, 53 funds held long stakes in Halliburton Company (NYSE:HAL) and 47 funds had positions in Baker Hughes at the end of the last year As of December 31, Charles Paquelet’s Skylands Capital owned 102,200 shares of the company. On the other hand, Jeffrey Ubben’s ValueAct Capital has more than 23 million shares of Baker Hughes Incorporated (NYSE:BHI).

Intercontinental Exchange Gets More Time

London Stock Exchange Group and Deutsche Boerse are likely to delay the vote on their proposed merger until after the June 23 Brexit referendum, according to a report from Reuters. This would give Intercontinental Exchange Inc (NYSE:ICE) more time to decide about its likely counter bid for the British stock exchange.

Last month, Deutsche Boerse announced that it had reached a merger agreement with London Stock Exchange Group worth $30 billion. Intercontinental Exchange Inc (NYSE:ICE) is bracing for a counter bid to acquire London Stock Exchange Group, which is expected to hold a shareholder meeting to vote for the merger with Deutsche Boerse before June 23. Intercontinental Exchange Inc (NYSE:ICE) has to file a counter bid seven days before the meeting. On Friday, Deutsche Boerse issued an explanation of the comments made by its chief financial offer, Gregor Pottmeyer, that Brexit would be a risk for US exchanges,  saying that Pottmeyer’s comments are his own views.

A total of 50 investors among those tracked by us held positions in Intercontinental Exchange Inc (NYSE:ICE) worth $2.3 billion at the end of last year. William Von Mueffling’s Cantillon Capital Management owns more than one million shares of the company as of the end of March.

On the next page, we’ll discuss J C Penney Company and American International Group. 

JCP Could Double in Next 3 Years

J C Penney Company Inc (NYSE:JCP)’s stock has gained more than 3% following a Barron’s report, which said that the stock price of the company could double in the next three years. The report added that J C Penney Company could earn $2 per share after it completes the turnaround in the next three to five years. J C Penney’s stock could surge as much as 50% – 100%, if Marvin Ellison, the new CEO of the company, could extend the ongoing improvements. The report cites Christopher Terry, a portfolio manager, who thinks that J C Penney Company is recapturing the market. Its margins and inventory are moving in the right direction despite the difficult times in the industry.

At the end of 2015, Jim Simons’s Renaissance Technologies was one of the biggest stakeholders in J C Penney Company Inc (NYSE:JCP) with the total ownership of more than 17.9 million shares of the company. He was among  the 27 hedge funds tracked by us that reported stakes in the company in the previous round of 13F filings.

American International Group Raises $1.25 Billion

American International Group Inc (NYSE:AIG) has raised $1.25 billion by selling a large part of its stake in People’s Insurance Company of China Holdings Company (PICC), China’s state-owned insurance company. AIG sold 740 million shares of PICC, most of which were bought by institutional investors. Peter Hancock, American International’s CEO, announced in January that he is going to create a new legacy portfolio, including divestitures,  reinsurance and sell-offs. This step was taken after pressure from elite hedge fund investors like John Paulson and Carl Icahn to boost returns.  American International Group is scheduled to announce its earnings for the last quarter after the closing bell today.

Overall, 101 hedge funds from our database held long positions in American International Group Inc (NYSE:AIG) at the end of the fourth quarter of 2015, having amassed $10.9 billion worth of stock. Stephen J. Errico’s Locust Wood Capital Advisers has 641,068 shares of the company, according to its 13F filing for the end of March.

Disclosure: None