Updated to reflect analyst comments in pages dedicated to Liberty Media and Tyco International.
NEW YORK ( TheStreet) -- Every quarter hedge funds and large investors file their holdings with the Securities and Exchange Commission, revealing value picks, cyclical bets, growth opportunities and activist pushes.
Reading between the lines, the holdings of some of the mightiest investors in the U.S. also gives insight into 2012 expectations for the still lukewarm M&A market, which is expected by many to pop at some point this year.
There are several surprise bets that poker-faced hedge funders made in the fourth quarter. For instance, some fund managers flocked to struggling Yahoo!, while struggling bank bull John Paulson dumped his holdings in America's largest banks and some managers unveiled big recovery bets.But after reading the "tea-leaves" on what holdings say about companies, sectors and the economy, it's also worth looking over portfolio changes for companies that may cut deals in the coming year. After all, when major deals like Kinder Morgan's (KMI) acquisition of El Paso (EP), Google's (GOOG) purchase of Motorola Mobility (MMI) and Duke Energy's (DUK) deal for Progress Energy (PGN) are announced, it's not much of a surprise to see the likes of Carl Icahn, Jana Partners and AQR Capital Management among the large shareholders benefitting from a premium-priced takeover. For instance, with slumping markets and some companies struggling to grow the top-line in 2011, shareholder activists like Icahn, Jana Partners, Bill Ackman-run Pershing Square Capital Management and Daniel Loeb-run Third Point pushed for business line divestitures and asset value realization strategies that provided a big lift to shares. Overall, because of shareholder activism and consensus in C-suites that smaller may be better and more valuable, tepid deal markets didn't temper a 2011 spinoff boom. Across all sectors, corporate divestitures were a bright spot for deal makers, rising 165% from 2011 and representing 5% of all deals activity, according to Dealogic. See 5 short sighted stock spinoffs for more on stock spinoffs. A poring over filings and top investor holdings shows that some funds are buying the deal rumor and are well positioned to reap big rewards from any future announcement, as investors jockey for 2012 positioning. It's especially the case because some funds are looking to improve on a mediocre 2011. Hedge funds posted their worst year since 2008 as market volatility proved to be a challenge even for pro investors. Hennessee Group, an adviser to hedge fund investors, said in January that its Hennessee Hedge Fund Index dropped 4.3% in 2011, compared to a flat performance for the S&P 500. It was the second year in a row that hedge funds failed to beat equity indices. A look through this week's filings show that some investors are making big bets on deal activity, with the potential for a quick and sudden jolt to their portfolios. Here are five deals to watch for in 2012.
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