Ashland Inc. (ASH): Here’s Why Shares Have Popped

This just in, Barry Rosenstein’s Jana Partners reported a buy of 7.4% of Ashland Inc. (NYSE:ASH), according to a Schedule 13D filing made with the Securities and Exchange Commission (SEC). According to a report in Alpha, Rosenstein considers the shares undervalued, therefore they represent an interesting investment opportunity. According to the filing, the deal was worth about $390.5 million and involved 5,813,787 shares of Ashland.

Generally speaking, 13Ds reveal the goals of passive hedge fund managers. These members of the “investing elite”aren’t exposed to a similar level of coverage as their activist peers, passive hedgies must be  in a similar light. Basically, it’s very important for average investors to pay attention to Barry Rosenstein’s latest move into Ashland Inc. (NYSE:ASH).

In the financial world, there are plenty of equity-based metrics, but there’s one that flies under the radar, so to speak: the sentiment of the world’s best money managers. Our research has demonstrated that retail investors who follow specific hedge fund activity can outperform the broader indices by an average of 18 percentage points per year (see the details here).

Focusing in on Ashland Inc. (NYSE:ASH), we can see that 37 other hedge funds were bullish according to our database. In particular, Richard Breeden’s Breeden Capital Management, Alexander Roepers’ Atlantic Investment Management, and Jeffrey Gates’ Gates Capital Management were long in Ashland, which is some of the best company a money manager can keep.

Earlier today, we analyzed this situation. Here’s what we had to say:

“Of course, we imagine that part of JANA’s investment thesis will involve some sort of special situation- the fund has bought up a large stake in the company very quickly, and so may push for some kind of transaction or merely want Ashland Inc. (NYSE:ASH) to return more cash to shareholders (the company does have about $500 million in cash on its balance sheet, or about 1 turn of EBITDA). As a result comparisons to similar companies, while they do show that Ashland’s valuation is reasonable as things stand compared to its peers, might underestimate the upside that Rosenstein and his team are seeking here.”

For a longer look at Ashland, and other equities held in Jana’s 13F portfolio, check out our comprehensive fund-by-fund database here.

Disclosure: none