Ubben Sells More Shares of Motorola Solutions Inc. (MSI), Meister Cuts Stake in This REIT, Plus 2 Other Moves

Fresh data shows that 2015 was the year with the highest number of hedge fund closures since the financial crisis, as increased volatility in equity markets significantly impacted the performance of the hedge fund industry. A total of 979 funds closed in 2015, compared to 864 registered in 2014. The survivor principle, which simply means that unsuccessful hedge funds go out of business, may play a key role in the performance of the hedge fund industry in the foreseeable future. According to data provider Hedge Fund Research, the average hedge fund was down by 3% in the first two months of 2016, but the performance of the entire industry has surely improved given the recent rally in U.S equities. Leaving this discussion aside, the following article will examine four SEC filings submitted by several widely-known hedge funds tracked by Insider Monkey.

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According to a newly-amended 13D filing with the SEC, Jeffrey Ubben’s ValueAct Capital currently owns nearly 8.52 million shares of Motorola Solutions Inc. (NYSE:MSI), which account for 4.9% of the company’s outstanding common stock. This is down from the stake of 8.76 million shares revealed in a Form 4 filing discussed by Insider Monkey on Friday. The activist investment firm owned 17.59 million shares of Motorola Solutions on December 31, as disclosed in the fund’s 13F for the October-to-December period. As discussed in several articles on Mr. Ubben’s investment in Motorola Solutions Inc. (NYSE:MSI), ValueAct Capital disclosed a 5.9% stake in the telecommunications company in June 2011. The friendly activist fund amassed a 10% stake through the end of 2012 and the fund’s investment has paid off handsomely in the subsequent years. However, the simple fact that Mr. Ubben’s firm has been gradually offloading its position in Motorola Solutions (taking some profits off the table) does not necessarily imply that the stock does not represent an attractive investment opportunity, so let’s take a brief look at the company’s recent financial performance.

Motorola Solutions primarily conducts its business through two segments: Products and Services. The Products segment, which derives revenue from a portfolio of infrastructure, devices, accessories, and software, generated net sales of $3.7 billion in 2015, a decrease of $131 million or 3% year-over-year. Meanwhile, the Services segment, which relies on a set of service offerings for government, public safety, and commercial communication networks, registered net sales of $2.0 billion in 2015, a decrease of $55 million or 3% year-over-year. Challenging macroeconomic conditions in Latin America and Eastern Europe, and foreign exchange headwinds negatively impacted the performance of the two segments. In the meantime, the stock is priced at around 14.8-times expected earnings, versus the forward P/E multiple of only 12.0 for the Communications Equipment industry. William B. Gray’s Orbis Investment Management trimmed its stake in Motorola Solutions Inc. (NYSE:MSI) by 12% in the December quarter, ending the year with 13.05 million shares.

The next two pages of this article discuss three separate filings submitted with the SEC by Corvex Capital and two other investment firms.

In a freshly-amended 13D filing, Bruce Berkowitz’s Fairholme Capital Management LLC reported owning 1.85 million shares of MRC Global Inc. (NYSE:MRC), which constitute only 1.8% of the company’s outstanding shares. This is down from the 5.75 million-share position revealed in the fund’s 13D filing on the company in late February. The mutual fund added about 120,000 shares to its portfolio from the beginning of 2016 through February 22, when the 13D filing was submitted. So why did Fairholme trim its stake in the industrial distributor of pipe, valves and fittings (PVF) to the energy industry so quickly? The 48% gain since February 22 might serve as one explanation for this move. The company’s business is highly dependent upon market conditions, and maintenance and capital expenditures in the energy industry, which were somewhat reflected in MRC Global Inc. (NYSE:MRC)’s 2015 top-line figure.

MRC’s 2015 sales were $4.53 billion, which represented a drop from $5.93 billion in 2014. The company has undertaken a series of moves to adjust its business to the challenging market conditions experienced throughout 2015, which included hiring and salary freezes, as well as a headcount reduction of 800 full-time positions. At the end of February, analysts at Longbow downgraded MRC Global to ‘Neutral’ from ‘Buy’, citing low crude oil and natural gas prices and a sustained decrease in CAPEX investments. Longbow asserted that there was no “tangible catalyst for improved demand on the horizon”. Nonetheless, the recent rally in crude oil prices has acted as such a catalyst, as it may enable some companies to drive up their investments. A total of 21 hedge funds in our system had stakes in MRC at the end of December 2015, amassing almost 22% of the company’s shares. D.E. Shaw & Co. L.P., founded by David E. Shaw, had 2.90 million shares of MRC Global Inc. (NYSE:MRC) in its portfolio at the end of 2015.

Keith Meister’s Corvex Management LP recently ceased to be the beneficial owner of more than 5% of Vereit Inc. (NYSE:VER)’s shares. As revealed by a Schedule 13D filing, the activist firm currently owns 44.36 million shares of the REIT, which represent 4.9% of its outstanding common stock. This marks a decrease of 35.56 million shares from the stake revealed in the fund’s 13F filing for the December quarter. Vereit Inc. (NYSE:VER) is a full-services real estate operating company that conducts its operations through two business segments: its real estate investment segment, called REI; and its investment management segment, called Cole Capital. The company’s REI segment owns and manages a portfolio of 4,435 retail, restaurant, office and industrial real estate properties. Meanwhile, the Cole Capital segment is responsible for managing the day-to-day operations of certain non-traded real estate investment trusts, for which the company receives compensation and reimbursement. It is important to note that Vereit is among the most-favored REITs in the hedge fund industry (as far as those observed by Insider Monkey) at the end of December 2015, with 35 funds being invested in the company. Vereit pays out an annual dividend of $0.55 per share, which equates to a current dividend yield of 6.46%. Shares of Vereit are down by 13% in the past 12 months, despite having gained almost 10% since the beginning of 2016. Larry Robbins’ Glenview Capital reported owning 17.37 million shares of Vereit Inc. (NYSE:VER) through the latest round of 13F filings.

According to a separate 13D filing, Alex Denner’s Sarissa Capital Management LP and Ariad Pharmaceuticals Inc. (NASDAQ:ARIA) have agreed to an amendment to a previous agreement reached in April 2015, with the amendment stipulating that the standstill provisions included in the April settlement agreement were terminated on March 17, 2016. Sarissa Capital, which owns 12.85 million shares of the global oncology company, also agreed not to submit a director nomination notice or business proposal at the company’s 2016 annual meeting of stockholders. Mr. Denner’s investment firm entered into an agreement with Ariad Pharmaceuticals to settle a proxy contest last April, under which former Chairman, CEO and President, Harvey J. Berger, stepped down. The company’s Board of Directors formed a CEO search committee at that time, which was chaired by Mr. Denner. In December, the company announced that its Board of Directors had approved the appointment of Paris Panayiotopoulos as President and CEO, with him taking on his duties beginning January 1.

Ariad’s first approved cancer drug, Iclusia (ponatinib), is being marketed in the United States, Europe and other countries for the treatment of patients suffering with rare forms of leukemia. The drug generated net product sales of $112.5 million in 2015. There were 29 hedgies observed by Insider Monkey with long positions in the oncology company at the end of the fourth quarter, accumulating nearly 21% of its outstanding shares. Zach Schreiber’s Point State Capital had ownership of 4.25 million shares of Ariad Pharmaceuticals Inc. (NASDAQ:ARIA) at the end of the December quarter.

Disclosure: None