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Jerome Lande Appointed To Itron Inc. (ITRI)’s Board, While Pennant Capital Cuts Stake In Mattress Firm

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It is my view that shareholder activism is widely misunderstood and overly criticized by the masses; many tend to think that activist hedge funds target certain companies for short-term gains at the expense of long-term value creation. Renowned activist investor Carl Icahn and other activists have been attempting to persuade market participants and society in general that shareholder activism is good for businesses and that this type of investing is not as short-term oriented as many would think. Numerous sources reveal that activist hedge funds have outperformed the broader market over the past several years, which is why the Insider Monkey team discusses and analyzes the majority of activists’ moves. For that reason, this article covers two 13Ds (activist positions) and one 13G (passive position) filed with the SEC by several widely-recognized hedge funds monitored by our team.

At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning 102% and beating the market by more than 53 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.

According to a Schedule 13D filing, Ricky Sandler’s Eminence Capital LP exercised 683,561 call options underlying shares of Autodesk Inc. (NASDAQ:ADSK), which had a strike price of $35. Similarly, 683,561 put options with the same strike price expired simultaneously with the exercise of the call options. Thus, Eminence Capital entered into a straddle (i.e. options strategy that is entered into by buying a call option and a put option with the same strike price and the same expiration month in an attempt to profit from relatively large price movements), generating a decent profit on this strategy. The public filing reveals that Sandler’s fund holds 13.08 million shares of the design software and services company, accounting for 5.8% of its outstanding common stock.

Autodesk Inc. (NASDAQ:ADSK) develops software and services targeting three primary markets: architecture, engineering, and construction; manufacturing; and digital media and entertainment. The software company is currently in the process of transitioning its business model towards a single subscription model, shifting away from selling perpetual licenses and term-based offerings. This transition is likely to enhance the company’s global penetration, though it is expected to put some weight on its revenue growth in the forthcoming quarters, as subscription offerings have substantially lower up-front prices. Shares of Autodesk are up by nearly 2% for the year, after advancing by more than 40% since the beginning of October.

The number of smart money investors invested in the software maker decreased to 32 from 45 during the September quarter, so several hedge funds seem to have failed to recognize potential investor interest in this company. These 32 shareholders held 20.80% of the company’s outstanding shares as of September 30, while the value of their overall investments declined to $2.08 billion from $2.25 billion quarter-over-quarter. John Griffin’s Blue Ridge Capital acquired a 6.92 million-share stake in Autodesk Inc. (NASDAQ:ADSK) during the third quarter.

Ricky Sandler
Ricky Sandler
Eminence Capital

Let’s head to the next page of this article, where we discuss a 13D and a 13G submitted by Coppersmith Capital and Pennant Capital Management, respectively.

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