In this article, we discuss the top 10 stock picks of Barry Rosenstein’s JANA Partners.
Barry Rosenstein is the managing partner and co-portfolio manager at JANA Partners. After graduating from Lehigh University in 1981 and receiving his MBA from the University of Pennsylvania’s Wharton School of Business in 1984, Rosenstein founded JANA Partners in 2001.
Before starting his own hedge fund, Rosenstein worked in management positions across different investment firms and private equity funds, including Sagaponack Partners, Genesis Merchant Group, Reatta Partners, and Plaza Securities Corporation. Rosenstein started his career in 1984 as an investment banker specializing in mergers and acquisitions with Merrill Lynch in New York. Barry Rosenstein has also served as a board of director at multiple companies including Cobra Electronics Corporation, Copart, Inc. (NASDAQ:CPRT), Convergys Corporation, and Walgreens Boots Alliance, Inc. (NASDAQ:WBA).
Barry Rosenstein is an activist investor who uses a fundamental value discipline to find undervalued public companies and leverages shareholder engagement to capitalize on that value. It was revealed at the end of August that Rosenstein, who holds a significant stake in Vonage Holdings Corp. (NASDAQ:VG), is pushing the company to possibly sell all of its business or at least part of it, since he believes that the company’s corporate structure is hindering the underlying businesses from unlocking their true potential, which largely impacts the company’s ability to deliver good shareholder returns. Vonage Holdings Corp. (NASDAQ:VG) stock rose 11% after Rosenstein’s stance on the company was announced.
Similarly, JANA Partners holds a position in Macy’s, Inc. (NYSE:M), and in October, the hedge fund urged Macy’s, Inc. (NYSE:M) to spin off its e-commerce business segment, following the footsteps of its competitor, Saks Fifth Avenue. Since the valuation of brick and mortar stores does not reflect the actual worth of their online segment, JANA Partners said that Macy’s, Inc. (NYSE:M) stock could double if the company went ahead with the corporate spin off of its e-commerce business.
The most notable stocks from Barry Rosenstein’s third quarter portfolio include Macy’s, Inc. (NYSE:M), Laboratory Corporation of America Holdings (NYSE:LH), Encompass Health Corporation (NYSE:EHC), and Vonage Holdings Corp. (NASDAQ:VG).
Barry Rosenstein of JANA Partners
Our Methodology
We used the third quarter portfolio of Barry Rosenstein’s JANA Partners to select the top 10 stocks of the hedge fund. Further, we have mentioned the Q3 earnings, analyst ratings, and the hedge fund around sentiment each stock to give readers additional context on the companies.
Top Stock Picks of Barry Rosenstein’s JANA Partners
10. BlackSky Technology Inc. (NYSE:BKSY)
JANA Partners’ Stake Value: $10,350,000
Percentage of JANA Partners’ 13F Portfolio: 0.82%
Number of Hedge Fund Holders: 21
BlackSky Technology Inc. (NYSE:BKSY) offers global monitoring services that deliver essential alerts to relevant authorities in times of distress. BlackSky Technology Inc. (NYSE:BKSY) leverages artificial intelligence, cloud computing, multi-sensor data fusion, activity analysis, and autonomous satellite tasking to provide accurate and essential alerts.
BlackSky Technology Inc. (NYSE:BKSY) is a new addition to Barry Rosenstein’s JANA Partners’ Q3 portfolio, with the hedge fund owning 1 million shares of the company, worth $10.35 million, representing 0.82% of the fund’s total 13F securities.
On November 12, BlackSky Technology Inc. (NYSE:BKSY) reported its Q3 earnings, posting a loss per share of $0.67. Revenue for the quarter totaled $7.9 million, up 49% year-over-year.
BlackSky Technology Inc. (NYSE:BKSY)’s newest satellites began revenue generating commercial operations within 18 hours of deployment, according to the chief operations officer of the company on December 13. The successful Rocket Lab Mission of BlackSky Technology Inc. (NYSE:BKSY) doubled the imaging capacity due to the company’s high-resolution small satellite constellation.
Chase Coleman and Feroz Dewan’s Tiger Global Management is the leading stakeholder of BlackSky Technology Inc. (NYSE:BKSY) in Q3, out of the 21 hedge funds that were bullish on the stock. Tiger Global Management added BlackSky Technology Inc. (NYSE:BKSY) in its portfolio in the third quarter, holding a $51.75 million stake.
BlackSky Technology Inc. (NYSE:BKSY) is a top stock pick of Barry Rosenstein’s JANA Partners, just like Macy’s, Inc. (NYSE:M), Laboratory Corporation of America Holdings (NYSE:LH), Encompass Health Corporation (NYSE:EHC), and Vonage Holdings Corp. (NASDAQ:VG).
9. Valvoline Inc. (NYSE:VVV)
JANA Partners’ Stake Value: $39,767,000
Percentage of JANA Partners’ 13F Portfolio: 3.18%
Number of Hedge Fund Holders: 23
Barry Rosenstein, via JANA Partners, owns 1.27 million Valvoline Inc. (NYSE:VVV) shares, worth $39.76 million, representing 3.18% of the firm’s total Q3 investments. Valvoline Inc. (NYSE:VVV) is an American company offering motor oil, additives, and lubricants under the Valvoline brand, in addition to owning car repair centers in the United States.
In the third quarter results, published on November 3, Valvoline Inc. (NYSE:VVV) posted an EPS of $0.50, beating estimates by $0.03. The quarterly revenue gained 28.07% year-over-year, amounting to $835 million, outperforming estimates by $6.12 million.
Goldman Sachs analyst Jason English on November 16 added Valvoline Inc. (NYSE:VVV) to the firm’s “Americas Conviction List” and maintained a Buy rating on the shares with a price target of $53, up from $45. The analyst stated that the company’s recent quarterly results and outlook highlighted that both of Valvoline Inc. (NYSE:VVV)’s businesses are achieving “substantial” market share gains, which should bring enduring benefits.
On October 25, Valvoline Inc. (NYSE:VVV) announced the launch of XEV, the company’s first China-based release of hybrid, plug-in hybrid, and pure electric vehicle products. XEV product line works to address needs specific to hybrid and EVs, including battery temperature variations, powertrain performance, brake system corrosion, and seal bearing failure.
In Q3 2021, 23 hedge funds tracked by Insider Monkey were long Valvoline Inc. (NYSE:VVV), with stakes valued at $641.8 million. Glenn Greenberg’s Brave Warrior Capital is the top Valvoline Inc. (NYSE:VVV) stakeholder, with 7.61 million shares worth $237.5 million.
Here is what Wasatch Core Growth Fund has to say about Valvoline Inc. (NYSE:VVV) in its Q2 2021 investor letter:
“Another significant contributor was Valvoline, Inc. (VVV), a company that manufactures lubricants and car parts and operates oil-change service centers. In addition to benefiting from the economic reopening, the company has discovered the advantages of making a mobile app available. Valvoline customers can use the app to find the closest service center and view live estimated wait times. Certainly, the adoption of technology to improve productivity and convenience isn’t a new theme. But we see mobile digitalization as a highly disruptive innovation that creates additional relationships among companies, distributors and customers. As a result, mobile digitalization is a competitive consideration in more and more of the companies that we evaluate for investment. In the first quarter, Valvoline’s stock declined partially because investors worried about the increasing popularity of electric vehicles (EVs)—which are much less dependent on petroleum products. But the stock rebounded in the second quarter, we think partly based on the realization that EVs still represent a tiny percentage of new cars sold and an even smaller percentage of cars in service. Moreover, Valvoline reported strong earnings and raised projections for the future.”
8. SPDR S&P 500 ETF Trust (NYSE:SPY)
JANA Partners’ Stake Value: $61,339,000
Percentage of JANA Partners’ 13F Portfolio: 4.90%
Number of Hedge Fund Holders: 69
In the third quarter of 2021, SPDR S&P 500 ETF Trust (NYSE:SPY) was a popular holding among the smart money, with 69 hedge funds holding stakes worth $6.25 billion in the ETF. This is compared to 76 funds being bullish on SPDR S&P 500 ETF Trust (NYSE:SPY) in the preceding quarter, with a total stake value of $4.96 billion.
One of the top SPDR S&P 500 ETF Trust (NYSE:SPY) stakeholders from the third quarter is LMR Partners, increasing its stake in the ETF by 14%, holding 2.7 million shares worth $1.15 billion.
SPDR S&P 500 ETF Trust (NYSE:SPY) is the largest exchange traded fund in the world, designed to track the movement of the S&P 500 Index. Barry Rosenstein’s JANA Partners holds 142,934 shares of SPDR S&P 500 ETF Trust (NYSE:SPY) as of the third quarter, worth $61.3 million, representing 4.90% of the fund’s total investments.
In addition to Macy’s, Inc. (NYSE:M), Laboratory Corporation of America Holdings (NYSE:LH), Encompass Health Corporation (NYSE:EHC), and Vonage Holdings Corp. (NASDAQ:VG), SPDR S&P 500 ETF Trust (NYSE:SPY) is a notable stock from Barry Rosenstein’s Q3 portfolio.
7. Macy’s, Inc. (NYSE:M)
JANA Partners’ Stake Value: $104,542,000
Percentage of JANA Partners’ 13F Portfolio: 8.36%
Number of Hedge Fund Holders: 41
Macy’s, Inc. (NYSE:M) is an American department store chain, founded in 1858, offering clothing, footwear, accessories, bedding, furniture, jewelry, beauty products, and housewares. In addition to the New York flagship store and 516 outlets around the US, Macy’s, Inc. (NYSE:M) has a strong e-commerce segment.
Macy’s, Inc. (NYSE:M) is a new arrival in JANA Partners’ Q3 portfolio, with the hedge fund holding 4.62 million Macy’s, Inc. (NYSE:M) shares, worth $104.5 million, representing 8.36% of the total Q3 securities. A total of 41 hedge funds in the third quarter database of Insider Monkey were long Macy’s, Inc. (NYSE:M), up from 35 funds in the prior quarter.
Cowen analyst Oliver Chen on December 10 considered Macy’s, Inc. (NYSE:M)’s to be one of the best ideas for 2022, stating that he views the company as an increasingly data centric retailer, driving better customer engagement through personalization, store fleet revisions, inventory, and pricing optimization. The analyst said that Macy’s, Inc. (NYSE:M)’s valuation is also compelling due to its free cash flow, a $2 billion real estate value, and the company approaching 40% digital penetration.
On November 18, Macy’s, Inc. (NYSE:M) posted its Q3 results, announcing earnings per share of $1.23, beating estimates by $0.90. The revenue jumped 36.34% year-over-year to $5.44 billion, exceeding estimates by $205.38 million.
The largest Macy’s, Inc. (NYSE:M) stakeholder from Q3 2021 is Arrowstreet Capital, increasing its stake in the company by 33%, holding 10.5 million shares worth $238.94 million.
6. Laboratory Corporation of America Holdings (NYSE:LH)
JANA Partners’ Stake Value: $108,458,000
Percentage of JANA Partners’ 13F Portfolio: 8.67%
Number of Hedge Fund Holders: 58
Laboratory Corporation of America Holdings (NYSE:LH), on October 28, posted solid Q3 results. EPS in the quarter equaled $6.82, beating estimates by $1.90. Revenue over the period totaled $4.06 billion, outperforming estimates by $427.23 million.
Laboratory Corporation of America Holdings (NYSE:LH) manages the largest clinical laboratory network in the world, operating 36 major laboratories in the US. In the third quarter, JANA Partners held 1.73 million Laboratory Corporation of America Holdings (NYSE:LH) shares, worth $108.45 million, representing 8.67% of the firm’s total investments.
Wells Fargo analyst Dan Leonard on December 14 raised the price target on Laboratory Corporation of America Holdings (NYSE:LH) to $340 from $330 and kept an Overweight rating on the shares, citing growth for Laboratory Corporation of America Holdings (NYSE:LH) amidst increased COVID-19 testing.
A total of 58 hedge funds reported owning stakes in Laboratory Corporation of America Holdings (NYSE:LH) in Q3 2021, up from 53 funds in the previous quarter. Gabriel Plotkin’s Melvin Capital Management is the leading Laboratory Corporation of America Holdings (NYSE:LH) stakeholder, with 1.9 million shares worth $534.73 million.
Here is what Weitz Investment Management Hickory Fund has to say about Laboratory Corporation of America Holdings (NYSE:LH) in its Q3 2021 investor letter:
“Labcorp has also been a year-to-date contributor as the company’s traditional lab business continues to recover and as it becomes clear that COVID-related demand will remain elevated for an extended period.”
5. CyrusOne Inc. (NASDAQ:CONE)
JANA Partners’ Stake Value: $134,514,000
Percentage of JANA Partners’ 13F Portfolio: 10.76%
Number of Hedge Fund Holders: 27
CyrusOne Inc. (NASDAQ:CONE), a Texas-based real estate investment trust with interests in carrier-neutral data centers, colocation, and peering services, is one of the top stock picks of Barry Rosenstein’s JANA Partners. The hedge fund holds a $134.5 million position in CyrusOne Inc. (NASDAQ:CONE) as of the end of September, which accounts for 10.76% of the total Q3 securities at JANA Partners.
In the third quarter, 27 hedge funds in the database of Insider Monkey were bullish on CyrusOne Inc. (NASDAQ:CONE), with one of the leading company stakeholders being billionaire Israel Englander’s Millennium Management, holding 555,535 shares worth $43 million.
On October 29, Jefferies analyst Jonathan Petersen downgraded CyrusOne Inc. (NASDAQ:CONE) to Hold from Buy with a price target of $90.50, up from $88, after the company agreed to be acquired by KKR & Co. Inc. (NYSE:KKR) and Global Infrastructure Partners in a $15 billion deal, for $90.50 per share in cash.
CyrusOne Inc. (NASDAQ:CONE), on October 27, reported a Q3 FFO of $0.01, beating estimates by $0.03. The revenue jumped 15.72% year-over-year to $304.10 million, outperforming estimates by $13.95 million.
As of September, of the 27 hedge funds that were bullish on CyrusOne Inc. (NASDAQ:CONE), billionaire Ken Griffin’s Citadel Investment Group was one of the largest CyrusOne Inc. (NASDAQ:CONE) stakeholders, increasing its stake in the company by 10%, holding a $120.4 million position.
4. Encompass Health Corporation (NYSE:EHC)
JANA Partners’ Stake Value: $150,222,000
Percentage of JANA Partners’ 13F Portfolio: 12.01%
Number of Hedge Fund Holders: 44
Encompass Health Corporation (NYSE:EHC) manages a network of inpatient rehabilitation hospitals, home health agencies, and hospice agencies, offering facility-based and home-based post-acute services to patients in 36 American states and Puerto Rico. JANA Partners holds a $150.2 million stake in Encompass Health Corporation (NYSE:EHC) as of September 2021, which represents 12.01% of the hedge fund’s total investments.
Mizuho analyst Ann Hynes lowered the price target on Encompass Health Corporation (NYSE:EHC) on November 3 to $80 from $94 and kept a Buy rating on the shares. The analyst reduced estimates to reflect the elevated staffing challenges that are likely to persist into 2022 and will impact expenses in all Encompass Health Corporation (NYSE:EHC) segments.
Encompass Health Corporation (NYSE:EHC) published its third quarter results on October 27, posting earnings per share of $1.03, missing estimates by $0.03. The revenue totaled $1.28 billion, missing estimated revenue by $29.01 million.
44 hedge funds in the Q3 database maintained by Insider Monkey were bullish on Encompass Health Corporation (NYSE:EHC), holding total stakes worth approximately $708 million. One of the biggest Encompass Health Corporation (NYSE:EHC) stakeholders is Polar Capital, with 992,110 shares worth $74.4 million.
Here is what Madison Funds has to say about Encompass Health Corporation (NYSE:EHC) in its Q3 2021 investor letter:
“We also added to our investment in Encompass Health, a provider of inpatient rehabilitation and home health. We believe the company will soon separate into two entities; and that will unlock value for shareholders. This is one of our favorite management teams and we see significant opportunities for both companies. We also exited several underperforming investments in this sector as COVID continues to disrupt routine healthcare procedures.”
3. Vonage Holdings Corp. (NASDAQ:VG)
JANA Partners’ Stake Value: $162,339,000
Percentage of JANA Partners’ 13F Portfolio: 12.98%
Number of Hedge Fund Holders: 29
Vonage Holdings Corp. (NASDAQ:VG), a cloud based communications provider, represents 12.98% of the total investments at JANA Partners as of the third quarter, with the hedge fund holding more than 10 million shares of the company, worth $162.3 million.
Vonage Holdings Corp. (NASDAQ:VG) posted on November 4 its Q3 results. EPS in the period came in at $0.04, in line with analysts’ consensus estimates. The revenue increased 13.17% from the prior year quarter, reaching $358.34 million, surpassing estimates by $10.97 million.
It was reported on November 22 that the Swedish telecommunications giant, Ericsson, would acquire Vonage Holdings Corp. (NASDAQ:VG) for $6.2 billion in cash. Following this news, Citi analyst Michael Rollins on November 30 downgraded Vonage Holdings Corp. (NASDAQ:VG) to Neutral from Buy with an unchanged price target of $21. The analyst expects the deal to close under the currently agreed-upon terms between Ericsson and Vonage Holdings Corp. (NASDAQ:VG).
The largest Vonage Holdings Corp. (NASDAQ:VG) stakeholder is Park West Asset Management, with the hedge fund increasing its stake in the company by 32% in Q3, holding 12.58 million shares worth $202.9 million. Overall, 29 hedge funds were long Vonage Holdings Corp. (NASDAQ:VG) in Q3 2021, with total stakes amounting to $843 million.
Here is what Adestella Investment Management has to say about Vonage Holdings Corp. (NASDAQ:VG) in their Q4 2020 investor letter:
“Vonage (VG) – the VG thesis has largely played out as expected. The market has gradually shifted its focus from the declining consumer operations to the growing business ones, highlighted by the API unit. As its legacy home phone VOIP solutions continue to become a smaller and smaller portion of the overall pie, we think this trend will continue. If the API unit can continue to grow at 25-30%, that segment alone covers most of the enterprise value at just a ~6x sales multiple before giving any credit to the sizable UCaaS operations. The API unit’s closest comparable, Twilio (TWLO), currently trades at 31x sales, so it’s not unreasonable to think there’s upside to our estimate here. Shares have returned around 80% since our writeup (and slightly higher from our cost as we added in the weeks that followed), but we’ve maintained most of our position as the key growth drivers remain intact.”
2. TreeHouse Foods, Inc. (NYSE:THS)
JANA Partners’ Stake Value: $205,656,000
Percentage of JANA Partners’ 13F Portfolio: 16.45%
Number of Hedge Fund Holders: 20
Publishing its third quarter earnings report on November 8, TreeHouse Foods, Inc. (NYSE:THS) posted an EPS of $0.46, missing estimates by $0.04. The $1.10 billion revenue exceeded estimates by $20.24 million and gained 5.31% from the preceding year quarter.
TreeHouse Foods, Inc. (NYSE:THS) is an Illinois-based multinational food processing company that produces private labeled packaged food. In the third quarter of 2021, Barry Rosenstein increased his stake in TreeHouse Foods, Inc. (NYSE:THS) by 36%, holding 5.15 million shares worth $205.65 million. The stock accounts for 16.45% of the JANA Partners’ total Q3 investments.
TreeHouse Foods, Inc. (NYSE:THS) announced on November 8 that its board of directors has approved a plan to explore strategic alternatives, including a possible sale of the company or a transaction to allow the company to focus on its higher growth snacking and beverages business by divesting a significant portion of its meal prep business.
Of the 20 hedge funds that were bullish on TreeHouse Foods, Inc. (NYSE:THS) in Q3 2021, Jim Simons’ Renaissance Technologies is one of the leading stakeholders of the company, with 616,777 shares worth $24.59 million.
Here is what Palm Valley Capital has to say about TreeHouse Foods, Inc. (NYSE:THS) in its Q3 2021 investor letter:
“During the quarter, we purchased TreeHouse Foods (ticker: THS), the market leading provider of private label foods in the U.S. Since being spun out of Dean Foods in 2005, TreeHouse has been an aggressive acquirer, increasing its size tenfold from 2008 to 2016. Since 2017, the company shifted its strategy from acquiring to improving efficiency, service levels, and profitability. With investors expecting another year of growth and improvement, on August 5th, the company announced it was reducing its earnings guidance for 2021.
There were two items that dragged down expectations. First, the company suffered from an unexpected shift by consumers towards branded products and away from private labels. As government stimulus dollars have boosted incomes, TreeHouse’s management has seen shoppers trade up to branded products. The second contributing factor harming results has become a common theme throughout the food industry—escalating commodity, freight, labor, and packaging costs. Management called the inflationary environment “extraordinary” and is in the process of raising prices. While they expect demand for private label foods to improve as government stimulus fades, it will not be in time to save 2021’s results. Earnings growth will likely not return until early next year.
Based on historical results and our normalized operating margin estimate, we believe TreeHouse can generate $300 million of annual free cash flow. In our opinion, this is attractive relative to the company’s $2.1 billion market cap. While TreeHouse’s $1.9 billion in debt is near our high-end threshold for financial leverage, we believe a portion of future cash flow will be used to pay down debt and repurchase shares, reducing the company’s financial risk and increasing its intrinsic value per share. TreeHouse Foods is a market leader in a stable and growing industry, and we view it as a high-quality small cap business. After being on our possible buy list for many years, we were happy to see its stock price fall abruptly to a level below our calculated valuation.”
1. Conagra Brands, Inc. (NYSE:CAG)
JANA Partners’ Stake Value: $272,692,000
Percentage of JANA Partners’ 13F Portfolio: 21.81%
Number of Hedge Fund Holders: 20
Conagra Brands, Inc. (NYSE:CAG) is a holding company from Illinois, offering consumer packaged goods to supermarkets, restaurants, and food service establishments. JANA Partners holds more than 8 million shares of Conagra Brands, Inc. (NYSE:CAG) as of September end, worth $272.69 million, representing 21.81% of the fund’s total Q3 investments. Conagra Brands, Inc. (NYSE:CAG) is the largest holding in the hedge fund’s portfolio.
On October 7, Conagra Brands, Inc. (NYSE:CAG) posted its Q3 results, announcing earnings per share of $0.50, beating estimates by $0.02. The quarterly revenue was down 0.96% year-over-year, reaching $2.65 billion, exceeding estimates by $114.09 million.
JPMorgan analyst Ken Goldman on October 8 downgraded Conagra Brands, Inc. (NYSE:CAG) to Neutral from Overweight with a price target of $38, down from $41. The analyst sees “still plenty to like” about Conagra Brands, Inc. (NYSE:CAG) and stated the stock’s valuation remains “appealing.” However, he prefers to be on the sidelines until he can see greater upside to earnings.
Citadel Investment Group increased its stake in Conagra Brands, Inc. (NYSE:CAG) by 1700% in the third quarter, holding over 4 million shares worth $138.8 million. Overall, 20 funds in the database of 867 elite hedge funds maintained by Insider Monkey were long Conagra Brands, Inc. (NYSE:CAG) in Q3 2021, down from 29 funds in the prior quarter.
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Disclosure: None. Top 10 Stock Picks of Barry Rosenstein’s JANA Partners is originally published on Insider Monkey.
