Ubben And ValueAct's Recent Success Makes Microsoft Buy Even More Compelling

| About: Microsoft Corporation (MSFT)

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Just yesterday, it was reported that activist investor Jeffrey Ubben, founder and CEO of ValueAct Capital, made a $2 billion investment in Microsoft (NASDAQ:MSFT). In the linked CNNMoney article above, Ubben shrugged off questions about Microsoft's ability to be innovative by saying:

Microsoft provides the plumbing that helps large and small businesses function, he explained. While many have derided Microsoft's inability to innovate, Ubben said that's not such a bad thing. "IT managers don't want constant change."

Looking back at ValueAct's most recent portfolio disclosure, we find that this $2 billion investment will be more than significant for the fund. As of December 31, 2012, ValueActs's holdings were valued at $7.855 billion with Adobe Systems (NASDAQ:ADBE), Motorola (NYSE:MSI), and Valeant Pharmaceuticals (NYSE:VRX) being the only holdings over one billion dollars ($1.179 billion, $1.609 billion and $1.049 billion respectively). Unlike most funds with a large number of holdings, ValueAct held shares in only 14 different companies AND all of them are up in 2013.

The following 7 holdings are up over 10% YTD (from highest to lowest gains in 2013):

  • Intercontinental Exchange (NYSE:ICE) up 25.41% YTD
  • Valeant Pharmaceuticals up 24.14% YTD
  • CBRE Group (NYSE:CBG) up 19.15% YTD
  • Adobe Systems up 18.18% YTD
  • Willis Group Holdings (WSH) up 16.46% YTD
  • Halliburton Company (NYSE:HAL) up 13.62% YTD
  • Motorola Solutions up 11.42% YTD

Other holdings were in (from highest to lowest gains in 2013) Gardner Denver (NYSE:GDI), Moody's Corp. (NYSE:MCO), MSCI Inc. (NYSE:MSCI), Rockwell Collins (NYSE:COL), KAR Auction Services (NYSE:KAR), Autodesk (NASDAQ:ADSK), and CR Bard Inc. (NYSE:BCR).

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Bottom Line

ValueAct is due to report its holdings as of 3/31/13 on or before May 15, 2013. Taking into consideration the size of the Microsoft investment in relation to the recent market value of the fund (25.6%), ValueAct either had a lot of money sitting on the side, raised capital or sold some of its previously disclosed holdings (stay tuned for a 1st quarter update). Either way, ValueAct is on a hot streak this year and investors should take note of the recent acquisition.

Microsoft shares are up 6% in the last 5 days and currently trade just 2% off of their 52 week high of $31.57.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.