market folly

Larry Robbins' hedge fund firm Glenview Capital just filed a 13G with the SEC regarding shares of Clearwire (CLWR). Due to portfolio activity on July 28th, Glenview has disclosed a 6.53% ownership stake in CLWR with 16,228,264 shares.

This activity marks a 76.5% increase in their position size since the end of the first quarter. So while they were buying as recently as the end of July, the crazy market volatility that has followed in August makes it hard to know if they've battened down the hatches and held onto these recently acquired shares, or if they instead chose to reduce risk. We've also detailed how Glenview bought Flextronics (FLEX) as well.

Glenview's Thesis on Clearwire

Glenview's previous letter outlined their thesis on Clearwire (CLWR) as they own equity and debt. The company owns 45 billion MHz of wireless spectrum and was the first true '4G' wireless network. They like CLWR under the notion that capex was behind the company ($20 billion) and growth was ahead. The stock currently trades around $1.52.

Robbins goes on to say that the main backdrop for investing in CLWR is that, "over the next four years, mobile traffic growth is expected to increase 40 times, driven by increased video usage and data plans on PCs/tablets/smartphones ... The appeal of Clearwire is therefore simple; Clearwire has aggregated an unmatched amount and a sufficient quality of spectrum to be a viable 4G offering for a wireless carrier."

The hedge fund likes Clearwire because: "a) there is significant downside support from asset value, b) the investment to build those assets is substantially behind them, and c) the wireless industry is at an inflection point in terms of demand for these assets."

Another bit worth noting: CLWR is owned mainly by strategic investors (~84%), primarily by Sprint (S). Glenview hypothesizes that should the AT&T (T) and T-Mobile merger be approved, Sprint could compete by moving to purchase the rest of Clearwire. Either way, Glenview likes the risk/reward of CLWR.

To see the rest of Glenview's investments, be sure to subscribe to our Hedge Fund Wisdom newsletter, as a new issue will be released in the next two weeks that updates top hedge fund portfolios.