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Billionaire Jeffrey Ubben Trims 13F Portfolio, but Remains Bullish on These Stocks

In an interview with CNBC in March, ValueAct Capital‘s founder and chief investment officer, Jeffrey Ubben, revealed that his fund was reducing its stake in a number of companies and that it was finding it difficult to redeploy that cash due to a lack of value bargains on the market. The latest 13F filing submitted by ValueAct Capital with the Securities and Exchange Commission (SEC) reveals that the value of the fund’s US equity portfolio shrunk to $10.02 billion at the end of March from almost $14.45 billion a quarter earlier.  The filing also revealed that during the first quarter the fund reduced its holding in four stocks and sold its entire stake in three stocks, but during the same period initiated a stake in only two stocks and made additional purchases in only one stock. Considering that ValueAct made it clear that it’s not really gung ho about US equities going forward, in this post, we will discuss the fund’s top three equity holdings and the two stakes it initiated during the first quarter and attempt to analyze why it is bullish on them.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

New Stakes

Alliance Data Systems Corporation (NYSE:ADS)

 – Shares Owned by ValueAct Capital (as of March 31): 541,115

 – Value of Holding (as of March 31): $119.05 million

Alliance Data Systems Corporation (NYSE:ADS)’s stock took a severe beating at the beginning of 2016 after the company reported mixed fourth quarter numbers. Although one can’t be sure but given ValueAct’s preference for buying stocks when they have fallen considerably and are trading cheap, it is quite possible that the fund initiated its stake in Alliance Data Systems Corporation (NYSE:ADS) after this decline. Similar to the fourth quarter, the company again reported lower-than-expected revenue numbers for its fiscal 2016 first quarter, which is one of the reasons why its stock hasn’t been able to recover and currently trades down by over 25% year-to-date. Following its fourth quarter earnings release, on April 26, analysts at Susquehanna initiated coverage on Alliance Data Systems Corporation’s stock with a ‘Neutral’ rating and $228 price target, which represents a potential upside of 10.7% from the stock’s current trading price. During the first quarter, legendary trader Steve Cohen‘s Point72 Asset Management made an over eightfold increase to its stake in Alliance Data Systems Corporation to 269,100 shares.

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