Icahn Protégé is Cashing Out of Ralcorp Holdings (RAH)

Page 1 of 2

Ralcorp Holdings, Inc. (NYSE:RAH) saw Corvex Capital dump 30% of its shares per a 13D filing this week. Corvex has reduced its stake from 2.9 million shares to just over 2 million following last month’s announcement that ConAgra Foods, Inc. (NYSE:CAG) had finally agreed to purchase rival food company for $5 billion or $90 per share. Keith Meister, a protégé of famed activist investor Carl Icahn, founded Corvex Capital in 2011. Billionaire George Soros seeded Corvex with $250 million and since then Meister has utilized a similar activist strategy as his former mentor.

Hedge Fund Strategies

As Corvex makes its exit from the food company we believe new investors may funnel in to capitalize on the merger-arbitrage opportunity. Investors can currently make money via a merger-arbitrage strategy, where the stock is only trading at $89.20 – offering investors a 1.8% annual yield assuming the deal closes in roughly six months. Merger-arbitrage is a strategy commonly employed by hedge funds when there is reasonable certainty that the deal will close (check out merger-arbitrage strategies here).

Investors can also find value in ConAgra apart from merge-arbitrage, especially when coupling Ralcorp’s food packaging portfolio. ConAgra is expected to see FY2013 sales up 7% and has made six acquisitions since 2011. Helping drive the growth will be Ralcorp’s strong portfolio of private label products that will compliment ConAgra’s branded products. ConAgra trades at one of the lowest valuations in the industry with a trailing P/E of 20x, but the food company also trades at a forward P/E of only 14x. Jim Simons is one of Ralcorp’s big name shareholders (check out Jim Simons’ top picks).

Campbell Soup Company (NYSE:CPB) pays one of the top dividend yields at 3.2% and is also one of the cheapest stocks in the industry with a 15x P/E. Putting the food company’s valuation in perspective is Campbell’s industry-low growth rate – 5-year expected earnings growth rate of only 5% – and high debt ratio of 45%. George Soros took a new position in this food company last quarter (see George Soros’ newest picks).

The Hershey Company (NYSE:HSY) has the managed to be up 20% year to date despite its low beta of 0.25. Hershey also pays a decent dividend yielding 2.7% and has one of the better 5-year growth rates at 10%. Although the food company appears to be a solid investment, on a valuation basis it trades a bit rich at a 2.4 PEG. Billionaire Ken Griffin – founder of Citadel Investment Group – is one of the top name shareholders loving Hershey (see Ken Griffin’s new picks).

Continue reading to see ConAgra’s top competitor…

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!