Polycom Inc (NASDAQ:PLCM) has rallied by 6% following a Wall Street Journal article stating that a second buyer has made a revised offer in which Polycom might find as ‘superior’ to the current one offered by Mitel Networks Corporation (NASDAQ:MITL) where Polycom shareholders would own 60% of the combination of the two. The second buyer, a private equity firm, offered two choices. Here’s how the Wall Street Journal put it:
“The unidentified private-equity firm presented two plans: an $11-a-share cash dividend, or the choice to trade the dividend for a new convertible preferred stock; or a “take private” deal of $11.50-a-share in cash with a contingent of up to $3 a share.”
If investors take up the second plan, and get all of the contingent of $3 per share, Polycom Inc (NASDAQ:PLCM) would have more upside left. Hedge funds are bullish on Polycom and the number of funds with long positions went up by four during the first quarter. Overall, 22 funds from the Insider Monkey database held long positions in Polycom as of the end of March. At the end of this article we will also compare PLCM to other stocks, including Ophthotech Corp (NASDAQ:OPHT), AAON, Inc. (NASDAQ:AAON), and Coca-Cola Bottling Co. Consolidated (NASDAQ:COKE) to get a better sense of its popularity.
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If you’d ask most investors, hedge funds are viewed as unimportant, old investment vehicles of yesteryear. While there are over 8000 funds in operation today, We choose to focus on the elite of this group, approximately 700 funds. It is estimated that this group of investors have their hands on the majority of all hedge funds’ total asset base, and by shadowing their inimitable picks, Insider Monkey has discovered several investment strategies that have historically surpassed the broader indices. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points a year for a decade in their back tests.
With this in mind, let’s take a closer look at the funds that have been invested in Polycom heading into the second quarter.
Of the funds tracked by Insider Monkey, Paul Singer’s Elliott Management has the number one position in Polycom Inc (NASDAQ:PLCM), worth close to $98.7 million, amounting to 1% of its total 13F portfolio. The second largest stake is held by George Soros’ Soros Fund Management, which holds a $91.1 million position; 2% of its 13F portfolio is allocated to the stock. Some other members of the smart money that hold long positions include Cliff Asness’s AQR Capital Management, David E. Shaw’s D E Shaw and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
As aggregate interest increased, some big names were breaking ground themselves. Water Island Capital, managed by John Orrico, created the most valuable position in Polycom Inc (NASDAQ:PLCM). Water Island Capital had $3 million invested in the company at the end of the quarter. Marc Majzner’s Clearline Capital also made a $2.2 million investment in the stock during the quarter. The other funds with brand new PLCM positions are Paul Tudor Jones’s Tudor Investment Corp, Michael Platt and William Reeves’s BlueCrest Capital Mgmt., and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Polycom Inc (NASDAQ:PLCM) but similarly valued. These stocks are Ophthotech Corp (NASDAQ:OPHT), AAON, Inc. (NASDAQ:AAON), Coca-Cola Bottling Co. Consolidated (NASDAQ:COKE), and Franklin Electric Co. (NASDAQ:FELE). This group of stocks’ market caps are closest to PLCM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OPHT | 24 | 345106 | 9 |
| AAON | 10 | 33187 | 4 |
| COKE | 6 | 50330 | -2 |
| FELE | 14 | 120756 | -1 |
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $137 million. That figure was $330 million in PLCM’s case. Ophthotech Corp (NASDAQ:OPHT) is the most popular stock in this table. On the other hand Coca-Cola Bottling Co. Consolidated (NASDAQ:COKE) is the least popular one with only 6 bullish hedge fund positions. Polycom Inc (NASDAQ:PLCM) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard OPHT might be a better candidate to consider a long position.
Disclosure: None
