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 02/16/2016. 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 Q3 2015.
This quarter, Ubben's US long portfolio decreased 16% from $17.20B to $14.45B. The number of holdings decreased from 15 to 14: a medium-sized stake in American Express was sold out during the quarter. The top three holdings are at 41.41% while the top five holdings are at 58.66% of the US long assets. The largest holding is Microsoft Corporation which was first purchased in Q1 2013 and now accounts for 21.75% of the US long portfolio.
To know more about activist investing, check out Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations.
Note: ValueAct is also known to have a ~10% activist stake in Rolls Royce (OTCPK:RYCEY). The position was established in mid-2015. The stake was increased substantially in November while simultaneously dropping a position in Smiths Group plc (OTCPK:SMGZY).Stake Disposals:
American Express (NYSE:AXP): AXP was a 4.87% of the US long portfolio stake established in Q2 2015 at prices between $77.16 and $81.36. Last quarter had seen a marginal increase. This quarter, the position was sold at prices between $68 and $77. The stock currently trades at $54.70.New Stakes:
Halliburton Company (NYSE:HAL): The 3.89% stake in HAL was first purchased in Q4 2014 at prices between $37.92 and $64.51. It was increased by ~62% the following quarter at prices between $37.33 and $44.87 and another ~11% in Q2 2015 at prices between $42.69 and $49.21. This quarter saw a ~56% reduction at prices between $33.40 and $40.41. The stock currently trades at $31.36.
Note: In mid-November 2014, Halliburton agreed to buy Baker Hughes 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.
Microsoft Corporation (NASDAQ:MSFT): MSFT is Ubben's largest position at 21.75% of the US long portfolio. The vast majority of the stake was built in Q1 & Q2 2013 at prices between $26.83 and $35.67. The position was since increased by ~28% through periodic buying. This quarter saw an about turn: ~25% reduction at ~$53.50 per share. The stock currently trades at $51.82. Ubben is harvesting long-term gains from this position.
MSCI Inc. (NYSE:MSCI): MSCI is a small 3.16% of the US long portfolio position. The majority of the original position was purchased in November 2012 at a cost-basis of around $26. This quarter, the stake was sold down by about one-third at ~$68.50 per share. The stock currently trades at $71.55. ValueAct has a 6.2% ownership stake in the business.
Note: Jeffrey Ubben criticized the company's business strategy in a letter to the board and in January 2015 succeeded in reaching an agreement whereby three new members were appointed to the board.Stake Increases:
Towers Watson & Co. (TW): TW is a very small 0.64% of the portfolio stake established last quarter and doubled this quarter.
Note: Willis Group Holdings offered to merge with Towers Watson in June 2015 and the transaction closed last month. The terms involved TW shareholders receiving 2.649 shares of WSH for each share held along with a $10 one-time cash dividend. Immediately following the merger, Willis did a reverse-stock-split (2.649:1) and rename transaction to form the new entity Willis Towers Watson plc (NASDAQ:WLTW).Kept Steady:
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. 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 quarter also saw another ~11% reduction at prices between $74.27 and $86.77. The stock is currently at $80.87 and the stake is still a large top-three position at 9.11% of the portfolio.
Note: A 2/2/2016 Form 4 regulatory filing showed ValueAct owning 11.77M shares. This is compared to ~14M shares in the 13F.
Agrium Inc. (NYSE:AGU): AGU is a medium-sized 6.19% 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. Q2 2015 saw a further ~26% increase at prices between $102 and $110. The stock currently trades at $82. ValueAct controls ~7% of the business.
Allison Transmission Holding (NYSE:ALSN): The original 18M share stake in ALSN is from Q2 & Q3 2013 at an average-cost-basis of around $23. It is now a medium-sized ~19M share stake at 3.43% of the portfolio. The stock currently trades at $23.03. ValueAct's ownership in the business is at 10.77%.
Armstrong World Industries (NYSE:AWI): AWI is a 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 $40.56. As a percentage of the portfolio, the position is small at 2.91%. For investors attempting to follow Ubben, AWI is a good option to consider for further research.
Note: In December 2014, ValueAct added a member to the board and in February 2015 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. (NYSE:BHI): The 7.43% of the US long portfolio BHI position was established in Q4 2014 at prices between $50 and $66. It was increased by 55% the following quarter at prices between $53.53 and $65.04. The stock currently trades at $42.14. ValueAct controls ~5.3% of the business.
CBRE Group (NYSE:CBG): CBG is a fairly large 7.50% of the US long portfolio stake. The vast majority of the ~31M share position (9.4% of the business) was established in 2011 & 2012 in the mid-to-high-teens price-range. The stock currently trades at $25.06.
Note: A Form 4 regulatory filing on 2/16/2016 showed Ubben owning 32.93M shares. This is compared to 31.33M shares in the 13F.
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 their 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 9.96% of the business. The stock is currently at $66 and the stake is still a large top-five position at 8.33% of the portfolio.
Twenty First Century Fox Class B (NASDAQ:FOX): FOX is a large (top-five) 8.92% 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. The stock currently trades below those ranges at ~$26.69. For investors attempting to follow ValueAct, FOX is a good option to consider for further research. ValueAct controls ~5.9% of the business.
Valeant Pharmaceuticals (NYSE:VRX): VRX is ValueAct's second-largest position at 10.55% 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. Last quarter saw a ~23% reduction at prices between $197 and $242. Ubben is starting to harvest long-term gains. The stock is now at $84.97.
Note: ValueAct's team is partly credited with transforming VRX from an early-stage pharmaceuticals business to the large-cap behemoth it is today - they helped recruit Valeant's CEO Mike Pearson and was also involved in the myriad deals that followed over the years.
Willis Group Holdings (WSH): WSH is a very long-term holding first purchased in 2009 and substantially increased in 2010. Q4 2012 & Q1 2013 saw a stake doubling at prices between $33 and $40 and since then the position has stayed relatively steady. ValueAct controls ~10% of the business.
Note: Last month, following a merger with Towers Watson, Willis Group Holdings did a reverse-stock-split (2.649:1) and rename transaction to form a new entity Willis Towers Watson plc.
The spreadsheet below highlights changes to Ubben's US stock holdings in Q4 2015:
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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