In this article we present the list of 8 Stocks Billionaire Barry Rosenstein Loves (And 2 He’s Given Up On). Click to skip ahead and see the 4 Stocks Billionaire Barry Rosenstein Loves (And 1 He’s Given Up On).
Macy’s, Inc. (NYSE:M), Zendesk Inc (NYSE:ZEN), and Conagra Brands, Inc. (NYSE:CAG) were a few of the most prominent stocks in activist investing titan Barry Rosenstein’s 13F portfolio at the end of 2021. Only two of them made the cut through the first quarter of 2022.
Barry Rosenstein’s JANA Partners is a New York-based activist hedge fund with $1.59 billion in assets under management as of March 30. The firm takes a fundamental, value-driven approach to its investments. It further augments its investments by taking an active approach to engaging with companies on constructive methods to unlock shareholder value.
After closing its two stock-picking, or “passive investment” funds in early 2019 and returning to an activist-centered approach to investing, JANA’s results have been exemplary. The Jana Strategic Investment fund returned 52% in 2019 and another 26% after fees in 2021, pushing its average annual returns to a stellar 18%.
Rosenstein graduated with honors from the University of Pennsylvania’s Wharton School of Business in 1984 and began his investing career with Merrill Lynch, where he focused on mergers. Rosenstein further honed his future activist investing chops while at Asher B. Edelman’s Plaza Securities Corporation, where he was the principal in charge of corporate takeovers. Rosenstein founded JANA Partners in 2001.
The fund, which managed over $12 billion in assets at one point before its passive investing purge, had a 13F portfolio valued at $1.54 billion on March 31, nearly identical to its AUM. There was some turbulence in the fund’s portfolio during Q1, as JANA unloaded four of its long positions, leaving it with just nine holdings in its 13F portfolio, one of which was an investment in the SPY.
In this article we’ll look at each of JANA’s eight other long positions, as well as two of the prominent investments which it unloaded during Q1.
The following data is gathered from JANA Partners’ latest 13F filing with the SEC. We follow hedge funds like JANA Partners because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.
All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q1 2022 reporting period.
8 Stocks Billionaire Barry Rosenstein Loves (And 2 He’s Given Up On).
10. BlackSky Technology Inc. (NYSE:BKSY)
Value of JANA Partners‘ 13F Position: $5.37 million
Number of Hedge Fund Shareholders (as of March 31): 19
Macy’s, Inc. (NYSE:M), Zendesk Inc (NYSE:ZEN), and Conagra Brands, Inc. (NYSE:CAG) have been some of the top stock picks in Barry Rosenstein’s portfolio in recent quarters. One of his smaller and lesser-known positions is in BlackSky Technology Inc. (NYSE:BKSY), a provider of satellite intelligence equipment. Rosenstein bought 1 million shares of BKSY when the company went public during Q2 2021, and has since raised his stake in the firm to 2.84 million shares.
BlackSky Technology Inc. (NYSE:BKSY)’s stock has cratered by 59% this year despite having a one-week stretch at the end of May where it gained 177%. That surge came after BlackSky was awarded a $1 billion, decade-long contract by the National Reconnaissance Office to gather satellite images related to historic imagery.
As BlackSky has managed about $40 million in revenue over the last year, the contract will increase the company’s annual revenue by 250% on average over the next ten years. BlackSky Technology Inc. (NYSE:BKSY) also lost $20 million in its latest quarter, but maintains a sizable amount of cash on its balance sheet, equivalent to nearly 50% of its market cap.
9. New Relic Inc (NYSE:NEWR)
Value of JANA Partners‘ 13F Position: $58 million
Number of Hedge Fund Shareholders (as of March 31): 30
Rosenstein’s activist fund bought 866,685 shares of New Relic Inc (NYSE:NEWR) during Q1, building a new stake in the company, which provides IT performance management tools to clients. Hedge fund ownership of NEWR jumped by 27% during Q4 as the stock soared in value, but declined by 21% in Q1.
Rosenstein’s fund was successful in remaking New Relic Inc (NYSE:NEWR)’s board of directors earlier this month. The two sides entered into a cooperation agreement that saw New Relic remove three board members and appoint two new ones, including Kevin Galligan, who serves as JANA’s director of research.
New Relic Inc (NYSE:NEWR) is coming off a difficult Q1 (the company’s Q4 of FY22) in which its revenue growth decelerated. The SaaS company also released disappointing FY23 projections that included guiding for a loss of between $0.31 and $0.37 per share, while analysts were expecting the company to return to profitability.
8. Laboratory Corp. of America Holdings (NYSE:LH)
Value of JANA Partners‘ 13F Position: $119 million
Number of Hedge Fund Shareholders (as of March 31): 49
Rosenstein trimmed his fund’s Laboratory Corp. of America Holdings (NYSE:LH)’s position by 3% during Q1, ending the quarter with 452,228 shares. 21% of the stock’s hedge fund shareholders as of December 31 decided to unload their positions during Q1, dragging hedge fund ownership of LH down to its lowest levels in nearly two years.
Laboratory Corp. of America Holdings (NYSE:LH) shares have been weighed down throughout 2022, losing 22% of their value due to concerns over what could be a long-term decline in Covid test screenings. LabCorp missed Q1 sales estimates across both its segments, but delivered strong free cash flow and $6.11 in adjusted earnings per share.
Laboratory Corp. of America Holdings (NYSE:LH) launched a review in March 2021 after JANA pressured the company to make changes and nominated directors for its board. LabCorp said that it would review its structure and capital allocation strategies with the goal of unlocking shareholder value. Shareholders have long pushed the lab testing company to sell off its drug development unit, Covance, which CEO Adam Schechter has resisted, believing them to be a winning combination.
7. TreeHouse Foods, Inc. (NYSE:THS)
Value of JANA Partners‘ 13F Position: $166 million
Number of Hedge Fund Shareholders (as of March 31): 21
Rosenstein’s JANA Partners is by far the largest shareholder of TreeHouse Foods, Inc. (NYSE:THS) among the select group of funds that are tracked by our database, owning 5.13 million shares on March 31. Hedge fund ownership of THS has declined by 36% since the middle of 2020.
JANA took a position in TreeHouse Foods, Inc. (NYSE:THS) in the fourth quarter of 2020 and by March 2021 had reached an agreement with the food company that saw two independent directors added to its board. The two sides expressed optimism in their partnership to unlock shareholder value, believing the stock to be mispriced.
FPA Queens Road discussed the activist involvement of JANA Partners and its wavering long-term conviction in TreeHouse Foods, Inc. (NYSE:THS) in its Q1 2022 investor letter:
“TreeHouse Foods, Inc. (NYSE:THS), a manufacturer and distributor of private label food, announced in November 2021 a plan to explore strategic alternatives. The company has been under pressure from activist investor Jana Partners. The company has resisted a sale of the entire business but continues to look for strategic divestitures. While the company appears reasonably valued, we are concerned about its long-term outlook and have reduced our holdings.”
6. LivePerson, Inc. (NASDAQ:LPSN)
Former Value of JANA Partners‘ 13F Position: $16.3 million
Number of Hedge Fund Shareholders (as of March 31): 25
Closing out the first part of the list is LivePerson, Inc. (NASDAQ:LPSN), which Rosenstein sold off during the first quarter, just one quarter after building a new stake in the provider of online chat platforms. Rosenstein is far from the only hedge fund manager looking to invest their dollars in other stocks, as there’s been a 29% drop in hedge fund ownership of LPSN since the end of 2020.
LivePerson, Inc. (NASDAQ:LPSN) came under further activist pressure in February of this year when Jeffrey Smith’s Starboard Value revealed a new stake in the company that it also began building during Q4. Some acrimony followed, as LivePerson criticized Starboard’s unwillingness to allow its director candidates to be interviewed, causing delays which threatened to push back the company’s annual meeting.
The Artisan Small Cap Fund continues to believe in the future profit cycle of LivePerson, Inc. (NASDAQ:LPSN), having this to say about the company in its Q4 2021 investor letter:
“LivePerson is a leading provider of mobile and online messaging solutions. We believe customer service and sales centers are shifting from voice to digital communications, and LivePerson is well equipped to lead this shift. Its LiveEngage cloud-based platform allows brands to engage with customers across digital channels at scale, more efficiently and more effectively. The market opportunity is substantial and goes well beyond digital conversations in service contexts and into areas such as sales, marketing and possibly social media monitoring. A key part of our thesis when we began our investment campaign in 2018 was the arrival of Alex Spinelli as the company’s CTO. Mr. Spinelli came from Amazon, where he was one of the architects and leaders of Alexa. In addition, Mr. Spinelli brought several well-respected technologists to LivePerson with him. Unfortunately, Mr. Spinelli announced his departure from LivePerson in Q3. In addition to this development, our profit cycle thesis has been stalled as the company makes a round of investments into its sales force which will weigh on margins over the near term. We believe Mr. Spinelli’s replacement, Andrew Hamel, carries the credentials to continue leading LivePerson’s technology efforts. Mr. Spinelli worked for Mr. Hamel at Amazon, and the investments in the sales force have the potential to allow the company to scale its business more rapidly. Still, we are in a holding pattern until we gain conviction that the profit cycle we originally invested in can continue to flourish with these changes.”
In the second half of this article we’ll take a look at how Rosenstein played Macy’s, Inc. (NYSE:M), Zendesk Inc (NYSE:ZEN), and Conagra Brands, Inc. (NYSE:CAG) during Q1, one of which was unloaded from his portfolio entirely.
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