Jeffrey Ubben is an activist value investor. He founded ValueAct Capital in 2000. Ubben claims that the strongest advantage at ValueAct is an ability to focus on a long-term basis. Ubben, being an activist investor, aims at internally changing the company for the better once he invests. He does that by being involved and working closely with the management teams of the company.
ValueAct Capital does not indulge in shorting. The firm makes three to four new investments in a year. Typically, ValueAct has approximately 15 to 20 holdings which it holds on to for three years on average. As of March, ValueAct Capital’s 13F equity portfolio is worth over $4 billion. Ubben’s latest move involves ValueAct backing Valeant Pharmaceuticals’ (VRX) acquisition attempt of Cephalon Inc. (CEPH).
Ubben reduced eight of his holdings in the first quarter of 2011. He reduced Kar Auction Services (KAR) by 60%, Gartner (IT) by 58%, Snap On (SNA) by 30%, and Valeant Pharmaceuticals by 27%. Furthermore, he decreased his holdings in Sara Lee (SLE) by 22%, Alere (ALR) by 14%, VeriSign (VRSN) by 11%, and Willis Group Holdings (WSH) by 1%. Since March 31, these eight stocks underperformed the market by 3.5 percentage points. His stock picks lost 10.5% since the end of March, same as the SPY. Here are Ubben’s favorite stock picks.
Company Name | Ticker | Value (x1000) | Activity | Return |
KAR AUCTION SERVI | KAR | 13,941 | -60% | -9% |
GARTNER INC | IT | 295,441 | -58% | -13% |
SNAP ON INC | SNA | 172,623 | -30% | -16% |
VALEANT PHARMA | VRX | 975,951 | -27% | -19% |
SARA LEE CORP | SLE | 484,238 | -22% | -1% |
ALERE INC | ALR | 166,756 | -14% | -37% |
VERISIGN INC | VRSN | 363,779 | -11% | -7% |
WILLIS GROUP | WSH | 346,225 | -1% | -9% |
BARD C R INC | 458,163 | 0% | -7% | |
ENERGYSOLUTIONS | 14,871 | 0% | -43% | |
IMMUCOR INC | 149,154 | 0% | 35% | |
NEW YORK TIMES | 66,290 | 0% | -22% | |
MOODYS CORP | 280,601 | 35% | -6% | |
ADOBE SYSTEMS | 20,755 | New | -27% | |
CEPHALON INC | CEPH | 145,679 | New | 5% |
FLIR SYSTEMS INC | 91,066 | New | -32% | |
MOTOROLA SOL | 178,335 | New | -10% |
ValueAct Capital’s largest holding is Valeant Pharmaceuticals. It makes up over 20% of ValueAct’s 13F portfolio. The firm reduced its holdings in the pharmaceutical company by 27% in the first quarter of 2011. Valeant recently bid $5.7 billion for drug maker Cephalon Inc. As of March 31, John Griffin’s Blue Ridge Capital and Andreas Halvorsen’s Viking Global are among the hedge funds with large VRX positions. Since the end of March, Valeant lost 19%.
In 2008, Ubben joined Sara Lee’s board. The company makes up 11.46% of ValueAct’s 13F portfolio. In the first quarter ending March, Ubben reduced his Sara Lee holdings by 22%. Since March, the company lost 1%, almost 10 percentage points better than the SPY. ValueAct Capital still has the largest position in the company. The second largest position is held by D E Shaw.
Earlier this year, Motorola split into two companies: Motorola Solutions and Motorola Mobility (MMI). Ubben prefers Motorola Solutions due to its growth and its improving margins. In the first quarter ending March 31, Ubben purchased 3.99 million shares of Motorola Solutions worth $178 million. It makes up 4.22% of ValueAct’s 13F portfolio. Motorola Solutions lost 10% since March 2011. Carl Icahn’s Icahn Capital has the largest position in the company.
Among Ubben’s top stock picks, Immucor has the highest gain since the end of March. This global vitro diagnostic company returned 35%. ValueAct Capital has the largest position in Immucor. It has 7.5 million shares of the company which is worth $149 million. Cliff Asness’ AQR Capital Management has the second-largest position.
Ubben could have beaten the market by a large margin if he hadn’t invested a large chunk of his portfolio in VRX. However, we believe the outcome is only temporary. In the long run, investors can beat the market by imitating Ubben’s top stock picks.
Disclosure: I am long NYT.
