Tracking Jeffrey Ubben's ValueAct Portfolio - Q2 2015 Update

|
Includes: ADBE, ALSN, AWI, AXP, BHC, BHGE, CBRE, FOX, HAL, MSCI, MSFT, MSI, NTR, PCP, WCC, WLTW
by: John Vincent
Summary

Jeffrey Ubben's 13F portfolio increased from $18.09B to $18.99B this quarter.

ValueAct Holdings substantially increased Twenty-First Century Fox and Agrium while reducing Valeant Pharmaceuticals.

The top-three positions are Valeant Pharmaceuticals (18.41%), Microsoft Corporation (18.37%), and Halliburton (8.93%), and they add up to ~46% of the portfolio.

This article is part of a series that provides an ongoing analysis of the changes made to Jeffrey Ubben's US stock portfolio on a quarterly basis. It is based on Ubben's regulatory 13F Form filed on 08/17/2015. Please visit our Tracking Jeffrey Ubben's ValueAct Portfolio article for an idea on his investment philosophy and our previous update for the fund's moves during Q1 2015.

This quarter, Ubben's US long portfolio increased 4.96% from $18.09B to $18.99B. The number of holdings in the portfolio decreased from 15 to 14: small positions in Precision Castparts (NYSE:PCP) and Wesco International (NYSE:WCC) were eliminated and a new position in American Express (NYSE:AXP) was established in the quarter. The top three holdings are at around 46% while the top five holdings are at just over 61% of the US long assets. The largest holding is Valeant Pharmaceuticals (VRX), which was first purchased in 2006 and now accounts for 18.41% of the US long portfolio.

Stake Disposals:

Precision Castparts and Wesco International: These were very small stakes established last quarter and disposed of this quarter. PCP was established at prices between $200 and $241 and sold at prices between $200 and $220. WCC was purchased at prices between $65.80 and $76.21 and eliminated at prices between $68.50 and $74.19.

New Stakes:

American Express: AXP is a fairly large 4.77% of the US long portfolio stake established this quarter at prices between $77.16 and $81.36. The stock currently trades at $77.10.

Stake Decreases:

Adobe Systems (NASDAQ:ADBE): ADBE is a long-term stake first purchased in 2011. Close to 25M shares were purchased at the time at a cost-basis of around $27 per share. The position was increased by 25% in 2012 as well at around $32. Since then, the stake was kept steady. Q4 2013 saw an about-turn as ~25% of the position was sold at prices between $51.57 and $60.89. Q4 2014 saw a further one-third reduction at prices between $60.88 and $76.02. Last two quarters saw marginal reductions. The stock is currently at $78.87.

Valeant Pharmaceuticals: VRX is ValueAct's largest position at 18.41% of the US long portfolio. ValueAct controls 4.4% of the business. It is a very long-term position that was first purchased in 2006. This quarter saw a ~23% reduction at prices between $197 and $242. Ubben is starting to harvest huge long-term gains.

Note: ValueAct's team is partly credited with transforming VRX from an early-stage pharmaceuticals business to the large-cap behemoth it is today - it helped recruit Valeant's hugely successful current CEO Mike Pearson and was also involved in the myriad deals that followed over the years. VRX stock is a 10-bagger over the last eight years.

Stake Increases:

Agrium, Inc. (AGU): AGU is a medium-sized 5.86% of the US long portfolio stake established in Q3 2014 at prices between $88.32 and $94.86. In Q4 2014, the position was increased by ~57% at a cost-basis of around $88. This quarter saw a further ~26% increase at prices between $102 and $110. The stock currently trades at $97.48. ValueAct controls ~7% of the business.

CBRE Group (CBG): CBG is a medium-sized 6.41% of the US long portfolio stake. The vast majority of the ~31M share position (9.4% of the business) was established in 2011 and 2012 in the mid-to-high-teens price range. The stock currently trades at $34.92. This quarter saw a marginal increase. Ubben is sitting on huge long-terms gains on this position.

Halliburton Company (NYSE:HAL): The 8.93% stake in HAL was first purchased in Q4 2014 at prices between $37.92 and $64.51. It was increased by ~62% last quarter at prices between $37.33 and $44.87 and another ~11% this quarter at prices between $42.69 and $49.21. The stock currently trades below his purchase price ranges at $35.73.

Note: In mid-November 2014, Halliburton agreed to buy Baker Hughes (BHI) in a cash-and-stock deal ($19 cash and 1.12 shares of HAL for each share of BHI held). ValueAct has a huge stake in Baker Hughes as well.

Twenty-First Century Fox Class B (NASDAQ:FOX): FOX is a large (top-five) 7.94% position. It was first purchased in Q2 2014 at prices between $31 and $35 and increased by a whopping 10x the following quarter at around the same price range. This quarter saw a further ~42% increase at around $32.50. The stock currently trades below those ranges at ~$27.92. For investors attempting to follow ValueAct, FOX is a good option to consider for further research.

Kept Steady:

Allison Transmission Holdings (NYSE:ALSN): The original 18M share stake in ALSN is from Q2 and Q3 2013 at an average cost basis of around $23. It had since been kept steady. Q4 2014 saw a minor ~6% increase at prices between $26.55 and $34.38. The stock currently trades at $28.52. The 3.09% portfolio stake is now at 10.77% of the business.

Armstrong World Industries (NYSE:AWI): AWI is a huge 9.2M share stake (16.8% of the business). It was established in Q2 2014 and increased by ~3x in Q3 2014 at around the low-50s price range. The stock currently trades at $57.10. As a percentage of the portfolio, the position is small at 2.71%. For investors attempting to follow Ubben, AWI is a very good option to consider for further research.

Note: In December 2014, ValueAct added a member to the board, and in February, it was announced that AWI will split into two publicly-traded units: one focused on the flooring business and the other in ceiling.

Baker Hughes, Inc.: The 7.93% of the US long portfolio BHI position was established in Q4 2014 at prices between $50 and $66. It was increased by 55% last quarter at prices between $53.53 and $65.04, and the stock currently trades at $49.63.

Microsoft Corporation (NASDAQ:MSFT): MSFT is Ubben's second-largest position at 18.37% of the US long portfolio. The vast majority of the stake was built in Q1 and Q2 2013 at prices between $26.83 and $35.67. The position was since increased by ~28% through periodic buying. The stock currently trades at $43.07.

Motorola Solutions, Inc. (NYSE:MSI): A huge 12.26% MSI position as of Q3 2014 was reduced to a still fairly large 7.39% stake (~39% reduction) in Q4 2014 at $66.26 per share - Motorola Solutions bought back the stock from ValueAct as part of its buyback in November 2014. The original position was from Q2 2011 when around 24M shares were purchased at around $45. The stake was increased to 29M shares in 2012 and had since been relatively steady. ValueAct still controls 7.8% of the business. The stock is currently at $62.45, and the current stake is at 5.57% of the US long portfolio.

MSCI, Inc. (NYSE:MSCI): MSCI is a small 3.17% of the US long portfolio position. The majority of the 9.3M share position (8.3% of the business) was purchased in November 2012 at a cost basis of around $26. The stock currently trades at $61.35.

Note: Jeffrey Ubben criticized the company's business strategy in a letter to the board, and in January, succeeded in reaching an agreement whereby three new members were appointed to the board.

Willis Group Holdings (WSH): WSH is a very long-term holding first purchased in 2009 and substantially increased in 2010. Q4 2012 and Q1 2013 saw a stake doubling at prices between $33 and $40, and since then, the position has stayed relatively steady. The stock currently trades at $44.63. ValueAct controls ~10% of the business.

The spreadsheet below highlights changes to Ubben's US stock holdings in Q2 2015:

Disclosure: I/we 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.