Top Merger Stocks for Fund Managers in Mid-Q3 2024: NYSE:HES Portfolio Insights
It has been a tumultuous time for merger arbitrage investors, with many deals facing delays, busts, or legal challenges. Despite the uncertainties in the market, fund managers continue to show strong conviction in certain merger stocks, signaling their belief in successful closures.
Hess Corporation (HES) and HashiCorp are currently the top stocks held by M&A funds, both involved in pending acquisitions. Hess, in particular, has garnered significant attention, with 24 out of 34 funds holding positions in the company. The acquisition by Chevron in an all-stock transaction has faced obstacles, leading to a delayed closure timeline. The dispute with Exxon over a right of first refusal clause in their Guyana joint operating agreement has further complicated the merger process.
HashiCorp (HCP) follows closely behind, with IBM in the process of acquiring the company for $35 per share. Despite facing a second request from the FTC, the deal is expected to close by the end of the year, offering an 11% IRR for investors.
Top 10 Merger Arb Stocks Held By Funds
1) Hess – Held by 24 funds with a 10% IRR
2) HashiCorp – Held by 20 funds with an 11% IRR
3) ANSYS (ANSS) – Held by 17 funds with a 31% IRR
4) Axonics (AXNX) – Held by 16 funds with a 12% IRR
4) Endeavor Group Holdings (EDR) – Held by 16 funds with a 2% IRR
6) Juniper Networks (JNPR) – Held by 15 funds with a 12% IRR
6) Albertsons Companies (ACI) – Held by 15 funds with a 182% IRR
8) United States Steel Corporation (X) – Held by 14 funds with an 87% IRR
9) Catalent (CTLT) – Held by 12 funds with an 18% IRR
10) Amedisys (AMED) – Held by 10 funds with a 32% IRR
When a fund allocates a significant portion of its portfolio to a merger stock, it reflects strong conviction in the deal’s successful closure. Hess, in particular, has been the top pick for 11 funds, showcasing high confidence in the acquisition’s outcome.
Oversized Holdings
Some arb funds have oversize positions in stocks they have great conviction in. As of June 30, several stocks accounted for at least 11% of a fund’s portfolio, including Hess, Endeavor Group, Marathon Oil, and others. These oversized holdings demonstrate the funds’ strong belief in the potential success of these mergers.
Conclusion
While there are no guarantees in the world of mergers and acquisitions, historical data shows that approximately 94% of all mergers do close successfully. By analyzing the strategies of top arb hedge funds, individual investors can gain valuable insights into potential investment opportunities. These funds have the resources, staff, and contacts to make informed decisions, enhancing the odds of a successful outcome.
Analyst’s Disclosure: I/we have a beneficial long position in the shares of LSXMK, JNPR, X either through stock ownership, options, or other derivatives. The opinions expressed in this article are my own and not influenced by any external factors. I do not have any business relationship with the companies mentioned.
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By delving into the world of merger arbitrage and analyzing the top merger stocks held by fund managers, investors can gain valuable insights into potential investment opportunities. While uncertainties persist in the market, strong conviction in certain merger stocks signals optimism for successful closures in the future.