Some big investors up e-commerce stakes
Institutional investors are increasing their stakes in some downtrodden e-commerce stocks, which remain fairly volatile even though large investors usually can stabilize a stock.
At Amazon.com, for example, institutional buyers that have traditionally held 25 percent to 30 percent of the company now hold around 39 percent, according to Jeetil Patel, an analyst with Deutsche Banc Alex Brown.
Legg Mason purchased nearly 33.4 million Amazon shares as of the close of last year, giving it a 9.4 percent stake in the company, according to filings with the Securities and Exchange Commission. Lincoln Capital Management increased its stake over the course of a year to nearly 25.8 million shares, or a 7.25 percent stake, from nearly 18.2 million, or a 5.11 percent stake.
At eBay, institutional investors with stakes in the company have risen to around 34 percent from a historical 25 percent to 30 percent, Patel said. Mutual fund Janus Capital holds nearly 14.5 million shares, or a 5.4 percent stake, as of Dec. 31, according to SEC filings.
Most companies prefer institutional investors, and volatility-averse individual investors take note of their moves. They generally buy large positions and hold them for 12 to 18 months.
"Institutional holders generally create stability, because they're not flipping the stock and trading it on a daily basis," said Brian Keane, an analyst with Prudential Securities.
But some of the larger e-tailing stocks remain volatile despite the increased institutional investment. Amazon stock, for example, closed Monday at $10.50, down more than 50 percent since late January, when it traded around $22 a share. eBay closed Monday at $37.06, down roughly a third since late January, when it closed around $55 a share. At Expedia, where institutional investors hold roughly 10 percent, the shares are down roughly a third from late February, closing at $12.44 Monday.
Analysts say that is partly due to hedge fund managers--another form of institutional investor--who are shorting stocks en masse, and because other investors have scaled back their stakes.
"Hedge funds are creating most of the volatility. They're shorting stocks and that has a lot to do with it," Keane said. "They'll be long on a stock for several days and then flip it."
Meanwhile, Janus has scaled back its Amazon holdings, to 19 million shares, or a 5.3 percent stake--down from 37 million shares, or a 10.7 percent stake, a year ago.