Jeff Ubben of ValueAct Capital is a pretty successful investor. Not only has he built up his fund to have an equity portfolio of $17.20 billion since founding ValueAct in 2000, but he also has successfully played the role of the ‘nice activist investor’, in which he and his fund work with management behind the scenes to unlock a company’s intrinsic value rather than go the typical activist approach of writing angry missives and launching full, frontal, public battles. Ubben usually employs a long-term approach in his investment process and given his success, let’s take a look at some of his conviction picks that ValueAct held in its equity portfolio for at least three years, which include Willis Group Holdings PLC (NYSE:WSH), CBRE Group Inc (NYSE:CBG), Adobe Systems Incorporated (NASDAQ:ADBE), Halliburton Company (NYSE:HAL), and Valeant Pharmaceuticals Intl Inc (NYSE:VRX).
We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 102% since then and outperformed the S&P 500 Index by around 53 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.
#5 Willis Group Holdings PLC (NYSE:WSH)
Shares held (as of September 30): 18.42 million
Total Value (as of September 30): $754.83 million
Percent of Portfolio (as of September 30): 4.39%
On December 11, Willis Group Holdings PLC (NYSE:WSH) and Towers Watson & Co (NASDAQ:TW) officially merged to form a global advisory and brokering powerhouse. Under terms of the deal, the combined company will be called Willis Towers Watson, and Willis shareholders will receive one share of the new company for each 2.649 Willis shares they own. Ubben likes the merger, which he thinks is highly accretive and will likely double the earnings by 2018. Among the other savvy investors in Willis is Jim Simons’ Renaissance Technologies with 990,905 shares as of the end of the third quarter.
#4 CBRE Group Inc (NYSE:CBG)
Shares held (as of September 30): 31.33 million
Total Value (as of September 30): $1 billion
Percent of Portfolio (as of September 30): 5.83%
Ubben likes CBRE Group Inc (NYSE:CBG) because it has large scale and substantial cross-selling opportunities. Much of CBRE Group’s revenue is repeatable and recurring. As a bonus, the company is not hard to understand and shares trade at a reasonable 14.64 times forward earnings estimates. Hedge fund sentiment towards the company has also been stable, with the number of funds from our database long the stock unchanged quarter-over-quarter at 32. Richard Blum‘s Blum Capital Partners owned 3.93 million shares of CBRE at the end of September.