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Buffett, Starboard Among the Elite Investors to Disclose New Moves

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The deadline for the current round of 13F filings, for the quarterly period that ended December 31, is February 15. Most market participants find these quarterly filings informative, as they reveal the top stock picks of the world’s most successful investors and hedge fund managers. However, most hedge fund firms tracked by Insider Monkey tend to submit their 13Fs very close to the deadline, so it might take a while until individual investors get to know hedge funds’ investment ideas for 2016. However, one can also examine funds’ 13D, 13G and Form 4 filings, which disclose up-to-date insights about managers’ moves in certain key positions. Having said that, this article discusses four such filings submitted by renowned hedge funds monitored by our team.

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 (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.

According to a freshly-amended 13D filing, Jeffrey Smith’s Starboard Value LP owns approximately 10.34 million shares of Darden Restaurants Inc. (NYSE:DRI), which account for 8.1% of the company’s outstanding common stock. This compares with the 11.64 million-share position revealed by Starboard in its 13F filing for the September quarter. The 13D filing disclosed that the activist firm offloaded a portion of its stake in the owner of full-service dining restaurants as part of a rebalancing process, thanks to the significant appreciation of the company’s stock since Starboard submitted its initial 13D more than two years ago. At the same time, the reputable activist hedge fund also revealed its plans to remain a large shareholder of Darden Restaurants, with Jeffrey Smith slated to continue serving as the company’s Chairman and a member of its Board of Directors.

Darden Restaurants Inc. (NYSE:DRI)’s stock has advanced by almost 22% over the past two-year period and by 4% in the past year. It seems that Starboard is cashing out at an opportune time, if bearing in mind the company’s valuation metrics. The stock trades at a trailing price-to-earnings ratio of 22.21, which is slightly above the average of 21.63 for the companies included in the S&P 500 Index. Furthermore, its forward P/E of 16.33 slightly tops the forward P/E ratio for the S&P 500, which stands at 15.75. The number of hedge funds from our database with positions in the company declined to 33 from 38 during the July-to-September period, though the value of their positions grew to $1.35 billion from $1.22 billion quarter-over-quarter. Jim Simons’ Renaissance Technologies acquired a 690,800-share stake in Darden Restaurants Inc. (NYSE:DRI) during the third quarter.

Jeffrey Smith
Jeffrey Smith
Starboard Value LP

The following two pages of this article reveal three separate moves made by Arrowgrass Capital Partners, Warren Buffett’s Berkshire Hathaway, and Redmile Group.

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