Long-Term Returns of Billionaire Barry Rosenstein’s Activist Targets

Published on September 12, 2023 at 11:33 am by Swati Goyal in Activism, Hedge Funds, News

In this article, we discuss the long-term returns of Rosenstein’s Jana Partners’ activist targets. If you want to see more stocks in this selection, check out Long-Term Returns of Jana Partners’ 5 Activist Targets.

Billionaire Barry Rosenstein is one of the most prolific portfolio managers and the brains behind Jana Partners, one of Wall Street’s most followed hedge funds. The activist investor mainly invests in companies that are undergoing a change or in need of operational improvement. He is best known for spearheading strategic changes in the race to unlock and maximize shareholders’ value.

Therefore, Jana Partners has been at the forefront in pushing for management and board changes in companies that appear to be trading below their fair value. In addition to pushing for leadership changes, the activist investor also calls for asset or unit sales in some activist campaigns as one of the ways of unlocking value. The changes are achieved mainly by pushing for board seats.

Jana Partners also has a reputation for working collaboratively with boards and management behind the scenes. It often tries to avoid proxy fights in some situations while still trying to advocate changes that can maximize shareholders’ value.

A Pennsylvania Wharton School of Business graduate, Rosenstein founded Jana Partners in 2001 with $35 million in Capital. The hedge fund has evolved from a value-oriented firm to an event-driven one before becoming a full-blown activist hedge fund. It also runs a special purpose acquisition company (SPACS).

While the hedge fund posted impressive results in the years following its inception in 2001, it has yet to see much better performance in recent years. It returned 7.9% in 2007, followed by a 23.4% loss in 2008 at the height of the financial crisis. It did bounce back in 2009 with a 23.9% gain.

Four years ago, Jana Partners closed its event-driven funds to primarily focus on activism, a decision that is slowly paying off. The hedge fund closed its stock-picking hedge funds Jana Partners and Jana Nirvana in 2019. The shutdown came as the fund shifted its focus to the main strategy of investing in a handful of companies and pushing for management to improve performance.

Jana Partners focused on its Jana Strategic Investment (JSI) fund, which made huge returns by restructuring its targets. JSI gained 30% in 2021, 52% in 2019, and 30% annually in the past three years. It also averaged 18% annually since its start, beating the S&P500.

Since 2001, Jana Partners has cemented its position and reputation as one of the most successful celebrity hedge funds alongside firms run by Daniel Loeb, Carla Icahn, William Ackman, and Jeffrey Smith. Having won board sets at Tiffany & Co. (NYSE:TIF) and Conagra Brands, Inc. (NYSE:CAG), the fund has successfully pushed for management changes to unlock shareholder value.

In addition, it also succeeded in forcing Qualcomm to cut costs and overhaul its compensation structure. It also pushed Pinnacle Foods into the sale of the ConAgra transaction that saw it generate a profit of $144 million.

Increased focus on Jana Strategic Investment, which focuses on activist campaigns, is already paying off. The Funds Series A fund generated annualized gains of 14% over the last four years, beating the S&P 500 by a cumulative net of 34%.

Rosenstein is best remembered for actively pushing for Whole Foods to be acquired by Amazon.com, Inc. (NASDAQ:AMZN) as one of the activist targets intended to unlock value. The activist investor also targeted McGraw Hill Cos, the owner of Standard & Poor’s, and hoped to break it up to unlock value. The company bowed to pressure and agreed to break up into two.

The activist investor has also had his presence felt in The Coca-Cola Company (NYSE:KO), one stock that once accounted for a big share of the hedge funds portfolio. He has also spearheaded activist campaigns at Apple and Civeo to unlock value.

Jana Partners has always invested in Consumer discretionary sectors, focusing on subsectors of food retail media and services.

Our Methodology

Rosenstein has had an impressive record as an activist investor. Most of the campaigns carried out over the past ten years have yielded significant results. Double-digit gains in some campaigns have affirmed the hedge fund manager’s status as one of Wall Street’s most successful activist investors. We have compiled some of the most extensive campaigns of the past decade from the SEC filings and ranked them based on when they occurred.

Long-Term Returns of Jana Partners’ Activist Targets

15. Charles River Laboratories International, Inc. (NYSE:CRL)

Activist Investment: 2010

Long-Term Returns Since Jana Partners’ Investment: 24%

S&P 500 Gain Since Jana Partners’ Investment: 17.4%

Charles River Laboratories International, Inc. (NYSE:CRL) is a non-clinical contract research organization providing drug discovery, development, and safety testing services. The company operates through three segments: of Research Models and Services (RMS), Discovery and Safety Assessment (DSA), and Manufacturing Solutions (Manufacturing).

Charles River Laboratories International, Inc. (NYSE:CRL) was first targeted by activist investor Jana Partners in 2010, as the hedge fund acquired 4.7 million shares for a 7% stake. With the investment, the activist investor started a campaign to block the company’s proposed $1.6 billion acquisition of Wuxi PharmaTech Caymen Inc

Jana Partners argued that the company was better off using the $1.6 billion to repurchase stock and boost the value of the underlying shares. Rosenstein also argued that the deal would end up giving WuXi a larger share of the combined companies at a time when its margins and growth rates were falling.

Charles River bowed into pressure, terminated the deal, and ended up paying a breakup fee of $30M to WuXi. After the activist campaigns, the company also replaced two board members and unveiled stock purchase authorization. The hedge fund reduced stakes in Charles River Laboratories International, Inc. (NYSE:CRL) in August of 2011.

14. Marathon Petroleum Corporation (NYSE:MPC)

Activist Investment: 2011

Long-Term Returns Since Jana Partners’ Investment: 177%

S&P 500 Gain Since Jana Partners’ Investment: 63%

Marathon Petroleum Corporation (NYSE:MPC) is an integrated downstream energy company specializing in refining crude oil and other feedstocks. • It also buys and sells refined products and ethanol and delivers refined products to customers.

In 2011, Marathon Petroleum Corporation (NYSE:MPC) was targeted by Jana Partners, which purchased a 5.5% stake. The investment came barely a year after the company was spun off, resulting in the creation of a company specializing in the refinery business.

In early 2012, the oil company confirmed plans to spin off its pipeline business, resulting in the shares jumping 10%. The announcement resulted in Jana Partners announcing plans to exit its position, satisfied with the move to unlock value. The hedge fund exited all its holdings in 2017.

13. Ashland Inc. (NYSE:ASH)

Activist Investment: 2013

Long-Term Returns Since Jana Partners’ Investment: 90%

S&P 500 Gain Since Jana Partners’ Investment: 37%

Ashland Inc. (NYSE:ASH) is a company that specializes in providing additives and specialty ingredients. It operates through Life Sciences Personal Care Specialty Additives and Intermediates segments. Jana Partners confirmed a 7.4% stake in the company in 2013 and pushed the company to do more to unlock shareholder value.

Part of the push involved urging the company to consider selling its water technologies business to focus on the core business. In 2014, the company confirmed plans to sell the water technologies unit for $1.8 billion to a fund managed by Clayton Dubilier & Rice. The divestiture allowed Ashland Inc. (NYSE:ASH) to focus on its core specialty chemical business.

The company also agreed to raise its quarterly dividend by more than 50% to 34 cents, the highest it had ever paid. It also unveiled a $600 million stock repurchase plan after the activist pressure. After unlocking significant value, Jana Partners exited its stake in Ashland Inc. (NYSE:ASH) in 2015.

12. Oil States International, Inc. (NYSE:OIS)

Activist Investment: 2013

Long-Term Returns Since Jana Partners’ Investment: -4.04%

S&P 500 Gain Since Jana Partners’ Investment: 10.3%

Oil States International, Inc. (NYSE:OIS) is a company that provides engineered capital equipment and products for the energy, industrial, and military sectors. It operates through three segments: of Well Site Services, Downhole Technologies, and Offshore/Manufactured Products.

Jana Partners first confirmed a 9.1% stake in the company in 2013, having purchased 5 million shares. With the investment, the activist investor insisted that the company’s shares were highly undervalued and was ready to engage management, board, and shareholders to explore unlocking it.

The activist investor also sought to discuss capitalization operations strategy and future plans in a bid to bring about changes that would increase shareholder value. Amid mounting pressure, the company announced plans to spin off its accommodations unit into a REIT or other structures. The accommodations unit provided housing for energy industry workers in Canada, the US, and Australia.

The activist investor started reducing stakes in Oil States International, Inc. (NYSE:OIS) in November 2013, netting about $23.7 million from the initial sales.

11. Hertz Global Holdings, Inc. (NASDAQ:HTZ)

Activist Investment: 2014

Long-Term Returns Since Jana Partners’ Investment: -48.9%

S&P 500 Gain Since Jana Partners’ Investment: 8.9%

Hertz Global Holdings, Inc. (NASDAQ:HTZ) is a vehicle rental company operating through two segments: Americas Rental Car and International Rental Car. It offers car rental services under the Hertz Dollar and Thrifty brands.

Jana Partners acquired a 1.3% stake in Hertz Global Holdings, Inc. (NASDAQ:HTZ) in 2014 and raised the stakes to 7% four months later, becoming the second largest shareholder behind Carl Icahn, another activist investor. The investment came when the company was trying to revive its fortunes, having replaced its CEO after activist pressure for Icahn.

Jana Partners started trimming its holdings at the end of 2015 as the stock price was in a downtrend.

10. Civeo Corporation (NYSE:CVEO)

Activist Investment: 2014

Long-Term Returns Since Jana Partners’ Investment: -82%

S&P 500 Gain Since Jana Partners’ Investment: 0.6%

Civeo Corporation (NYSE:CVEO) is a company that offers accommodation and catering services to the natural resource sector. It develops lodges villages and mobile assets, including modular, skid-mounted accommodation and central facilities for short- to medium-term accommodation needs.

In June 2014, Rosenstein released an 11.5% stake in Civeo Corporation (NYSE:CVEO) after acquiring 12.24 million shares. The acquisition came when the company was being spun off from Oil States International, of which the activist investor was the force behind the plan.

Barely a year later, had the activist investor unloaded all the stakes in Civeo Corporation (NYSE:CVEO) just two months after nominating three independent directors to the board? The exit marked the end of a six-month investment during which the company’s share price nosedived 82%.

9. Conagra Brands, Inc. (NYSE:CAG)

Activist Investment: 2015

Long-Term Returns Since Jana Partners’ Investment: 42.9%

S&P 500 Gain Since Jana Partners’ Investment: 41.78%

Conagra Brands, Inc. (NYSE:CAG) is a consumer packaged goods and food company that operates through Grocery and snacks, Refrigerated and frozen, International, and food service segments. Activist investor Rosenstein took a 7.2% stake in the company in 2015 and started discussions about a board seat to help address persistent underperformance.

The activist investor pushed for three seats on the board to help address operational performance and costs and look for ways to optimize capital structure. Conagra Brands, Inc. (NYSE:CAG)’s stock would jump by more than 60% a year after Rosenstein appointed Scott Ostfeld to the board.

In addition to management changes, the activist investor also pushed for selling private label operations to TreeHouse Foods for $2.7 billion in 2016 as one of the ways of unlocking value.

The activist investor started trimming stakes in Conagra Brands, Inc. (NYSE:CAG) in 2018 by 35% to about $3.2 million shares.

8. New Relic, Inc. (NYSE:NEWR)

Activist Investment: 2015

Long-Term Returns Since Jana Partners’ Investment: 44.1%

S&P 500 Gain Since Jana Partners’ Investment: 22.22%

New Relic, Inc. (NYSE:NEWR) is a software-as-a-service company that provides software platforms for customers to gather and analyze telemetry data in a single front-end application. Jana Partners took out stakes in the company in 2021 and started an activist push in the race to unlock shareholder value.

The activist investor urged management to consider the potential sale of the business as one of the ways of unlocking value. The push came on the company’s growth slowing as it stuttered on competing against other Application Performance Monitoring vendors.

In 2022, New Relic, Inc. (NYSE:NEWR) handed the activist two seats on the board, after which it agreed to abide by certain customary standstill provisions.

7. EQT Corporation (NYSE:EQT)

Activist Investment: 2017

Long-Term Returns Since Jana Partners’ Investment: 37.5%

S&P 500 Gain Since Jana Partners’ Investment: 95.20%

EQT Corporation (NYSE:EQT) explores and produces natural gas in the US. The company owns about 25.0 trillion cubic feet of proven reserves of natural gas, natural gas liquids, and crude oil across nearly 2.0 million gross acres. Jana Partners purchased a 5% stake in the company worth $497 million in 2017.

With the massive investment, the activist investor started pushing the company to abandon its proposed acquisition of rival Rice Energy. In return, the investor wanted EQT Corporation (NYSE:EQT) to consider separating its pipeline operations as one of the ways of unlocking value.

Rosenstein also accused the company of putting executive compensation ahead of shareholder value on its proposed Rice Energy acquisition.

6. Jack in the Box Inc. (NASDAQ:JACK)

Activist Investment: 2017

Long-Term Returns Since Jana Partners’ Investment: -26.67%

S&P 500 Gain Since Jana Partners’ Investment: 30.4%

Jack in the Box Inc. (NASDAQ:JACK) operates and franchises a chain of quick-service restaurants that offer burgers, sandwiches, tacos, and other food items in the US. The company’s stock popped 3% after Jana Partners confirmed it had bought $1.3 million shares worth $134 million in 2017.

The activist investor discussed the capital structure, margins, capital allocation, franchise mix, and operations with management. The company reached a deal with Jana Partners over two independent board members in 2018, averting a fierce proxy fight.

In 2018, Jack in the Box Inc. (NASDAQ:JACK) started exploring strategic alternatives, including a potential sale of the restaurant chain. By 2019, the activist had trimmed its stakes in the company to just about 790K.

Click to continue reading and see Long-Term Returns of Jana Partners’ 5 Activist Targets.

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