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Rackspace Hosting, Inc. (RAX), Akamai Technologies, Inc. (AKAM), and Babcock & Wilcox Co (BWC): Friendly Activist Clifton Robbins’ Picks Inch Up in First Quarter

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Clifton RobbinsBlue Harbour Group had a solid start this year, according to our data, which shows that the fund’s long equity positions posted a weighted average return of 4% for the first three months of 2015. The methodology is based on holdings from the latest 13F filing and comprises companies exceeding a market cap of $1 billion. In Blue Harbour’s case, 19 out of a total of 22 long positions fulfilled the criteria. Since hedge funds typically have positions in other securities, which they are not required to disclose in their 13Fs, Blue Harbour’s actual returns may deviate from our calculations.

Clifton Robbins Blue Harbour

Although activist by definition, Robbins is more of a ‘friendly activist’ as it is better suited to his investment approach. Former partner at private equity giant KKR, Robbins founded Blue Harbour Group in 2004 with an intention to create value for the companies and their shareholders based on collaboration with the management. The $3.7 billion hedge fund has never been involved in a proxy fight or even sued a company. The market value of the fund’s equity portfolio stood at $3.12 billion at the end of 2014 with Technology amassing 34%, which is the largest share across sectors. Star performers among the fund’s top picks during the first quarter were Rackspace Hosting, Inc. (NYSE:RAX), Akamai Technologies, Inc. (NASDAQ:AKAM), Babcock & Wilcox Co (NYSE:BWC), and Investors Bancorp, Inc. (NASDAQ:ISBC), which represent four largest positions from the investor’s equity portfolio.

Blue Harbour initiated a stake in Rackspace Hosting, Inc. (NYSE:RAX) in the second quarter of 2014, when the ailing company was striving to make a turnaround under the leadership of its President and CEO, Taylor Rhodes in an extremely competitive space of cloud computing. The fund’s major incentive for investing in the company at that time was Rackspace’s ability to support a strong buyback program given its strong balance sheet during its turnaround phase. The company has over 300,000 business customers and proclaims itself to be a leader in the managed cloud segment. Rhodes’ turnaround efforts seem to be working as the company posted returns of 10.21% during the January-March period.  Rackspace Hosting, Inc. (NYSE:RAX) represented Blue Harbour’s most valuable equity holding at the end of the fourth quarter, with 9.14 million shares valued at $427.99 million. Another prominent stockholder of the technology company was Barry Rosenstein‘s JANA Partners as it held some 8 million shares valued at $374.56 million.

Next in line is Akamai Technologies, Inc. (NASDAQ:AKAM), whose stock rose by 12.85% during the first quarter. The fund held 5.11 million shares of another provider of cloud services valued at $321.68 million. Content Delivery Network (CDN) services form the core of Akamai Technologies, Inc. (NASDAQ:AKAM)’s operations, but with its latest acquisition of Xerocole, the company is aiming to expand its portfolio of the Domain Name System (DNS) services and offerings. Beside Blue Harbour, another significant shareholder of the company is Philippe Laffont‘s Coatue Management, which increased its stake in Akamai Technologies, Inc. (NASDAQ:AKAM) by 45% during the fourth quarter to 4.71 million shares.

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