4 Stocks Billionaire Barry Rosenstein Loves (And 1 He’s Given Up On)

4. Mercury Systems, Inc. (NASDAQ:MRCY)

Value of JANA Partners‘ 13F Position: $209 million

Number of Hedge Fund Shareholders (as of March 31): 18

Rosenstein trimmed his Mercury Systems, Inc. (NASDAQ:MRCY)’s position by 10% during Q1, to 3.24 million shares after building a much larger stake in the defense contractor during Q4. Hedge fund ownership of MRCY has been extremely volatile over the past few years, with the number of funds long the stock dipping to as few as 6 at the end of 2018, from as many as 26 in the middle of 2020.

Mercury Systems, Inc. (NASDAQ:MRCY) is another stock that both JANA Partners and Starboard Value have taken an activist interest in recently. JANA began pushing the company to consider selling itself last December, and had teamed up with several potential director candidates. During Q1, Starboard took a new, slightly larger stake in MRCY than the one JANA owns and began pushing for operational changes at the company, including potentially slashing the company’s R&D budget.

Baron Small Cap Fund likes the presence of activists like Rosenstein and Jeffrey Smith in the stock, noting that it indicates the stock has untapped value. The fund had this to say about Mercury Systems, Inc. (NASDAQ:MRCY) in its Q1 2022 investor letter:

“Mercury Systems, Inc. (NASDAQ:MRCY), a leading Tier 2 defense electronics contractor, bounced back, along with the broader defense industry, after the Russian invasion of Ukraine and a larger-than-expected U.S. defense budget for fiscal 2023. As Mercury is involved in all the key priorities of the current U.S. defense strategy, we believe that growth will accelerate in the future. Mercury has been struggling with program delays and supply-chain issues for much of the last year, and the stock has been under pressure for some time. Activists bought stakes recently, which we view as an indication of value in the stock. We are hopeful that the company will revert to its historic growth algorithm or high single-digit organic revenue growth, faster profit growth, and strategic and accretive acquisitions, which would drive much higher EBITDA and a higher valuation, in line with past norms.”