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George Soros Buys 7.98% Stake in Digital River, Steven Cohen Buys 5.4% of GNC
Posted by: Holly LaFon (IP Logged)
Date: March 30, 2012 05:20PM
Two billionaire investors GuruFocus tracks bought large positions in companies in recent weeks, according to GuruFocus Real Time Picks. George Soros, the founder of the Quantum fund, increased his position in Digital River (DRIV) 7.98% of the company. Steven Cohen, founder of SAC Capital Advisors, bought a 5.4% stake in GNC Holdings Inc. (GNC).
Digital River (DRIV)
George Soros had followed Digital River in the last. He bought several thousand shares and quickly sold them several times since the third quarter of 2009, and most recently sold out in the fourth quarter of 2010. Then, on March 19, 2012, he bought 3,084,460 shares at an average price of $18 per share, or a 7.98% stake in the company.
Digital River helps companies manage cloud commerce to grow their revenue through global commerce, e-marketing and payment solutions. In the last five years, its stock has declined 66%. Year to date, however, the stock has been recovering, rising 25%.
The trajectory of Digital River shares has roughly followed its financial results over the last several years. After consistent growth from 2002 to 2009, its revenue declined to $363 million in 2010 from $404 million in 2009. Its stock dropped markedly in mid-2011 when its second-quarter revenue dropped to $92.5 million from $98.2 million in the first quarter. Net income fell from $7 million to $290,000. It also issued third quarter guidance below analysts’ estimates.
Improved results spurred the stock’s upswing in 2012. The week of January 31, when it announced its fourth-quarter and full year 2011 results, the stock increased 10.6%. In the fourth quarter the company’s revenue was $112 million, above guidance of $103 to $105 million and fourth quarter 2010 revenue of $97.7 million. Full year revenue was $398.1 million, above guidance of $389 to $391 million and 2010 revenue of $363.2 million. GAAP net income was $17.2 million, or $0.46 per diluted share, compared to $15.7 million, or $0.41 per diluted share, in 2010.
The company expects full year 2012 revenue in the range of $402 to $409 million and GAAP diluted earnings per share in the range of $0.54 to $0.64.
The company’s revenue decline in 2010 was the result of a terminated contract with Symantec that lost $89.6 million. Symantec accounted for approximately 6.9% and 28.4% of total revenue in 2010 and 2009, respectively. Symantec revenue was minimal in 2011. Microsoft Corp. (MSFT) is a major customer, accounting for approximately 27.7%, 23.7% and 11.8% for revenue in 2011, 2010 and 2009, respectively.
Digital River’s 2011 revenue increase was related primarily to a $26.8 million increase in commerce revenue and favorable foreign exchange.
GNC Holdings (GNC)
Steven Cohen is accelerating his accumulation of GNC Holdings shares. He bought 23,111 shares at approximately $19.31 in the second quarter 2011, 164,489 shares at $22.68 in the third quarter 2011, and 706,855 shares at $25.70 in the fourth quarter of 2011. On March 19, he increased his stake 540% at $33.89 per share and now owns 5,726,760 shares.
GNC Holdings Inc. is a retailer of nutritional vitamin, mineral, herbal and other specialty supplements, as well as sports nutrition, diet and energy products. Since going public in April 2011 its stock has increased 108%.
Since 2008, GNC’s sales have risen each year, most recently reaching $2.1 billion in 2011. Earnings did the same thing and reached $128 million in 2011. Its gross margin, operating margin and net margin are all at their highest levels since 2008. Return on assets increased every year to a record 5.26%, though return on equity declined from 19.41! in 2010 to 15.97 in 2011.
The health supplements industry is expected to grow 3.7% through 2017, according to Nutrition Business Journal’s Supplement Business Report 2011. GNC expects its leading market position to enable it to grow at a faster rate, due to its large market share, economies of scale, brand awareness and vertical integration.
Mario Gabelli – Thomas & Betts (TNB)
Mario Gabelli, founder of GAMCO Investors, made a smaller purchase on March 27. He increased his stake in Thomas & Betts by 4.75% at approximately $72 per share and now owns 3,934,796 shares.
Thomas & Betts is a low voltage electrical components business that also produces commercial heating and ventilation units. It has an annual revenue per share growth rate of 7.1% for the last 10 years, and free cash flow growth rate of 16% over the same span of time and a market cap of $3.75 billion. On Jan. 30, 2012, it was announced that ABB Ltd. (ABB) would acquire the company for $72 per share in cash or approximately $3.9 billion. The offer price was a 24% premium to the company’s closing stock price of almost $80 on January 27 and 35% premium to the volume weighted average stock price over the last 60 trading days.
On word of the acquisition, TNB stock jumped to near the purchase price. Soon thereafter, shareholders launched numerous investigations into whether the company got the absolute highest price or shopped the company adequately before agreeing to the transaction. The deal was slated to close by mid-2012, but no news has emerged about its status since then.
Steven Cohen also bought Hyatt Hotels Corp. (H) and added shares of Amarin Corp Plc (AMRN) in March. See his equity portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Steven Cohen. See George Soros’ equity portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of George Soros. See Mario Gabelli’s equity portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Mario Gabelli.
See more guru stock trades at GuruFocus Real Time Picks.
Guru Discussed: George Soros: Current Portfolio, Stock Picks
Stocks Discussed: DRIV, GNC, TNB, ABB, H, AMRN,