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Here’s How Billionaire Activist Barry Rosenstein Positioned His Portfolio For Q4

In its most recent 13F, billionaire Barry Rosenstein’s JANA Partners has disclosed a U.S equity portfolio worth $8.9 billion as of the reporting period of September 30. New York-based JANA Partners is an event-driven hedge fund co-founded in 2001 by Mr. Rosenstein, who is a highly-qualified activist investor. The fund primarily focuses on the public stock markets in the United States, employing different strategies such as an activist strategy, market-neutral strategy, and risk arbitrage strategy, among others. During the third quarter, JANA Partners initiated new positions in 16 companies, while selling off its holdings in 26 stocks. In this article, we will analyze JANA Partners’ top five holdings, in terms of value, as of September 30.

Barry Rosenstein - Jana Partners

Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by more than 53 percentage points since the end of August 2012. These stocks returned a cumulative of 102% vs. a 48.7% gain for the S&P 500 Index (see more details here). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).

Barry Rosenstein
Barry Rosenstein
JANA Partners

#5 Allergan PLC (NYSE:AGN)

– Shares held (as of September 30): 1.89 million

– Total Value (as of September 30): $512.89 million

JANA Partners’ fifth-ranked holding is represented by Allergan PLC (NYSE:AGN), in which the fund increased its position during the quarter by 268,546 shares. Having a market cap of over $117 billion, Allergan PLC is a global pharmaceutical company focused on eye care, neurosciences, medical dermatology, medical aesthetics, breast enhancement, obesity intervention, and urologics. Bloomberg reported that billionaire investor Dan Loeb, the founder of activist hedge fund Third Point, recently proposed that Allergan PLC and biotechnology company Amgen Inc. (NASDAQ:AMGN) should consider a merger. Loeb believes that such a deal between the two companies would create multiple avenues for growth, Bloomberg reported, citing unnamed sources who did not want to be identified. Amgen is the second-largest equity holding of Third Point as of the end of the third quarter, with the fund owning 9.85 million shares. Third Point owned 3.67 million shares of Allergan at the end of the third quarter. Allergan PLC (NYSE:AGN)’s shares rose by 4.57% on Wednesday. The stock has gained 20.58% year-to-date.

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#4 Hertz Global Holdings Inc (NYSE:HTZ)

– Shares held (as of September 30): 39.19 million

– Total Value (as of September 30): $655.68 million

Rosenstein reduced his position in Hertz Global Holdings Inc (NYSE:HTZ) by 2.75 million shares quarter-over-quarter. Hertz, which is engaged in the car rental business, announced last month that it completed the sale of the France and Spain divisions of Hertz Equipment Rental Corporation (HERC) to LOXAM Group by transferring the entire share capital of Hertz Equipement France SAS and Hertz Alquiler de Maquinaria SLU. The deal included 60 locations in France, and two in Spain. Hertz Global Holdings posted impressive financial results for the third quarter, with the company’s income increasing year-over-year by 59% to $237 million. Its total revenue was $3.0 billion, representing a year-over-year decrease of 5%. Carl Icahn sees value in Hertz, as his fund Icahn Capital LP held 51.92 million Hertz shares at the end of September.

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On the next page, we will be discussing the top three picks of Barry Rosenstein.

#3 Walgreens Boots Alliance Inc (NASDAQ:WBA)

– Shares held (as of September 30): 13.75 million

– Total Value (as of September 30): $1.14 billion

Rosenstein’s stake in Walgreens remained unchanged during the third quarter. Last month, Walgreens Boots Alliance announced that it agreed to acquire Rite Aid Corporation (NYSE:RAD), a U.S retail pharmacy chain, for about $17.2 billion or $9.00 per share. There is some speculation that federal regulators could shutter the deal, which would create a monopoly in the U.S pharmacy business. Subject to approval, the deal is likely to close in the second half of 2016. Walgreens Boots Alliance Inc (NASDAQ:WBA) reported solid financial results for the fourth quarter of fiscal 2015, ended August 31. The company’s profit was $26 million compared to a loss of $221 million in the same quarter of last year. Furthermore, it managed to increase its quarterly sales by 49.7% to $28.5 billion. Shares of Walgreens Boots Alliance Inc (NASDAQ:WBA) have increased by 11% year-to-date. Another investor that likes Walgreens Boots Alliance is Stephen Mandel’s Lone Pine Capital, holding 6.79 million shares as of the end of September.

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#2 ConAgra Foods Inc (NYSE:CAG)

– Shares held (as of September 30): 30.57 million

– Total Value (as of September 30): $1.24 billion

ConAgra Foods Inc (NYSE:CAG) is a packaged food company, with a market cap of over $17 billion. JANA Partners was bullish on the company in the previous quarter, increasing its position by 19.03 million shares. ConAgra Foods announced that it plans to separate into two independent public businesses, with the consumer brands business being renamed Conagra Brands, while the frozen potato business will operate as Lamb Weston. The transaction, expected to be completed in the fall of 2016, will be structured as a spin-off of the Lamb Weston business, tax-free to the company and its shareholders. Shares of ConAgra Foods Inc (NYSE:CAG) are trading up by 12.82% year-to-date. In its latest 13F, Ken Griffin’s Citadel Investment Group disclosed holding 6.40 million ConAgra Foods shares as of the end of September.

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#1 QUALCOMM Inc. (NASDAQ:QCOM)

– Shares held (as of September 30): 28.55 million

– Total Value (as of September 30): $1.53 billion

QUALCOMM Inc. (NASDAQ:QCOM) is represented as JANA Partners’ top holding, with the fund reducing its position in the company slightly during the third quarter, by 268,838 shares. Qualcomm is a developer of advanced wireless technologies, products and services. On Tuesday, the company confirmed that it is facing an antitrust probe in South Korea. In a statement, Qualcomm said that it recently received the Korea Fair Trade Commission’s staff-generated Case Examiner’s Report (ER), which commences a process that affords the company the ability to respond to allegations and defend itself. The ER alleges, among other things, that Qualcomm does not properly negotiate aspects of its licenses, and that its practice of licensing its patents only at the device level and requiring that its chip customers be licensed to its intellectual property violate Korean competition law. The ER proposes remedies including modifications to certain business practices and monetary penalties, according to the company. QUALCOMM Inc. (NASDAQ:QCOM)’s stock has lost 35.42% year-to-date. SPO Advisory Corp, run by John H. Scully, owned 9.44 million shares of QUALCOMM at the end of the third quarter.

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Disclosure: None

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