Jeffrey Ubben founded ValueAct Capital in 2000. The California-based hedge fund has recently filed its 13F filing, in which it disclosed its equity portfolio worth $11.02 billion as of the end of June. Mr. Ubben has worked as a managing partner at Richard Blum’s Blum Capital Partners before starting his own hedge fund. In 2013, Ubben got a seat on Microsoft’s board despite having a paltry position. Mr. Ubben also oversees The Posse Foundation, a nonprofit organization that trains student leaders from public high schools to form multicultural teams.
ValueAct’s investment strategy initially was to focus on valuation and quality discipline, but after the financial crisis of 2008, ValueAct started catering for a vast array of metrics like capital allocation, acquisitions, budgeting and compensation. ValueAct generally makes only three to four new investments in a year, and is famous for its long-term vision. It often holds about 15 positions and the average holding period for each position is about three years. In this article, let’s take a look at some stocks, in which ValueAct boosted its position during the second quarter.
Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that imitating the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012 (read more details here).
Baker Hughes Incorporated (NYSE:BHI)
– Shares Owned by ValueAct Capital (as of June 30): 38.89 million
– Value of ValueAct Capital’s Holding (as of June 30): $1.75 billion
Jeffrey Ubben’s ValueAct Capital added over 15.63 million shares of the oilfield services company to its equity portfolio during the three-month period from April-June, increasing its hold in the company by 67%. The total position now accounts for a whopping 16% of the hedge fund’s equity portfolio. Earlier this month, Baker Hughes Incorporated (NYSE:BHI) announced rig count for July which stood at 938, 11 units better than a month earlier. The Texas-based company missed second-quarter earnings estimates, having reported a net loss of $0.90 per share, versus estimates of a loss of $0.68, but revenue of around $2.40 billion, was $80 million above expectations. Shares of Baker Hughes are up by almost 10% so far in 2016. As of the end of the second quarter, Natixis Global Asset Management’s Harris Associates owns over 4.7 million shares of Baker Hughes.
Alliance Data Systems Corporation (NYSE:ADS)
– Shares Owned by ValueAct Capital (as of June 30): 3.29 million
– Value of ValueAct Capital’s Holding (as of June 30): $ 644.17 million
ValueAct Capital boosted its stake in Alliance Data Systems Corporation (NYSE:ADS) by some 2.75 million shares during the second quarter. Last month, the Texas-based provider of royalty and marketing solutions reported second-quarter earnings of $3.68 per share on $1.75 billion revenue, crushing estimates of EPS of $3.59 on $1.64 billion in revenue. The firm expects to earn $16.85 per share in 2016, versus the consensus estimate of $16.78. Shares of Alliance Data Systems have lost over 22% since the start of the year. Barry Rosenstein’s JANA Partners owns 675,412 shares of the company as of the end of the second quarter.
We will continue our discussion of ValueAct Capital’s biggest moves of the second quarter on the next page.