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Barry Rosenstein’s JANA Partners Moves on To Ashland Inc. (ASH)

A 13D filed with the SEC has disclosed that JANA Partners, an activist and value hedge fund managed by Barry Rosenstein, owned 5.8 million shares of Ashland Inc. (NYSE:ASH), a $6.7 billion market cap diversified chemicals company. JANA recently failed in its attempt to gain board seats at agricultural products wholesaler and retailer Agrium Inc. (USA) (NYSE:AGU) in an effort to push that company into breaking up those two businesses. We track quarterly 13F filings from hedge funds, including JANA, as part of our work developing investment strategies (we have found, for example, that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year) and so we can see that at the end of December the fund had not owned any shares. See which stocks JANA reported owning. In the 13D, JANA did not specify any specific moves it is looking for from Ashland Inc. (NYSE:ASH) but mentions that it has had conversations with management “…and may take other steps seeking to bring about changes to increase shareholder value.”

Barry Rosenstein JANA PARTNERS

The first quarter of Ashland Inc. (NYSE:ASH)’s fiscal year ended in December 2012. Revenue was down slightly compared to the same period in the previous fiscal year, but the company more than made up for it with lower costs with the result being a large percentage increase in earnings. Ashland Inc. (NYSE:ASH) has four business segments, each of which is responsible for at least 18% of sales. The largest changes within these segments from the last quarterly report were a decline in both revenue and earnings in Performance Materials, and a significant widening of operating margins at Consumer Markets (the other two segments are Specialty Ingredients and Water Technologies). Wall Street analyst expectations for the fiscal year ending in September 2014 result in a forward P/E of 10, with future growth resulting in a five-year PEG ratio of 0.9.

Atlantic Investment Management was the largest holder of the stock at the end of December out of the filers which we track, with a position of 2.4 million shares (find Atlantic’s favorite stocks); note that this was much lower than what JANA currently owns. Ralph Whitworth’s Relational Investors was another major shareholder, reporting ownership of 1.7 million shares (check out Whitworth’s stock picks). Renaissance Technologies, founded by billionaire Jim Simons, was buying shares between October and December, closing 2012 with a total of about 430,000 shares in its portfolio (research more stocks Renaissance was buying).

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