Here is yet another reminder why small, individual investors
should not be spending their time and savings on buying
individual stocks. The savvy pros always manage to find some
sort of advantage.
Case in point: California-based activist investor Relational
Investors, co-founded by Ralph Whitworth and David Batchelder,
has identified its newest target Dallas-based Flowserve
The activist investment firm earlier this week filed a 13D
disclosing it owned more than 3 million shares, or 5.65
percent, of Flowserves total shares outstanding. It also
simultaneously filed a delayed 13F disclosing it owned more
than 238,000 shares at the end of the first quarter. Flowserve,
which has a $6 billion market capitalization, makes industrial
pumps, valves and other equipment for the chemical, oil and gas
and power industries.
Keep in mind that the deadline for the March 2012 13F was
around May 15. So, it took about a 40-day extension. Investors
can obtain an extension for the filing if they feel it could be
hurt by the disclosure. Under SEC rules, investors can seek
"confidential treatment" in certain limited circumstances for
an ongoing investment strategy, including an ongoing program of
acquisition or disposition. It is not unusual for us to
request confidential treatment while in an accumulation
program, Whitworth said in a phone interview.
So, thanks to this provision, the $6 billion Relational
wound up accumulating most of its Flowserve position since the
end of the first quarter, but chose not to disclose its
earlier, much smaller position until it passed the magic 5
percent threshold required to file the 13D. This presumably
gave the company more time to pick up a lot of stock without
tipping off other investors.
And lo and behold, between May 15 when the stock topped $108
and earlier this week when the disclosures were made by
Relational, Flowserves stock hit interim lows of $101 and
$100. Even so, according to the SEC filing, Relational seemed
to buy most of its shares between $104 and $108. The stock
closed Thursday at $111.18.
Whitworth and Batchelder are two savvy activist operators.
Whitworth has served on the boards of 11 public companies,
including Hewlett-Packard, where he currently remains a
director, Genzyme, Mattel, Sirius Satellite Radio, Sovereign
Bancorp and Sprint Nextel. He also has served as chairman of
Apria and Waste Management. Batchelder has served as chairman
of one public company and as a director of 10 others. Few
individual stock pickers can match that level of