Barry Rosenstein‘s JANA Partners is one of the largest hedge funds that have disclosed their equity portfolio in the last day of 13F filings. The equity portfolio of the fund is diversified as always and contains 80 positions with an aggregate value of $19.3 billion, up from $16.2 billion held at the end of the second quarter. The fund has made some interesting bullish moves during the third quarter of 2014 and we are going to discuss the top holdings in terms of value in which JANA Partners has raised its position during the July-September period. The companies that we will mention are: Walgreen Company (NYSE:WAG), eBay Inc (NASDAQ:EBAY), and PetSmart, Inc. (NASDAQ:PETM).
Mr. Rosenstein is a famous activist investor, which is why his moves are followed very closely and are always on radars. The fund focuses on companies with good management, but also pays attention to the business and the cash that the company holds. One of the latest moves made by Mr. Rosenstein was in Hertz Global Holdings, Inc. (NYSE:HTZ), of which JANA Partners owns 10.98 million shares as of the end of September, the stake being increased by 85% over the quarter. At the beginning of November, the investor sent a letter to the company’s board, proposing the nomination of Scott Thompson as the new CEO of Hertz.
Walgreen Still on Top
Walgreen Company (NYSE:WAG) is the largest long position in JANA Partners’ equity portfolio. During the third quarter, the fund added over 1.39 million shares to its stake, taking it to 12.5 million shares, valued at $740.88 million. However, we know that the fund has further increased the stake in October. JANA Partners purchased 1.25 million shares and currently owns 13.75 million shares. At the beginning of September, Mr. Rosenstein was appointed to the board of directors of Walgreen Company (NYSE:WAG), where he serves on the Finance Committee and on a new strategy committee. Overall, since the second quarter of 2013 (when JANA initiated a stake with 1.31 million shares), the stock appreciated by more than 50%.
A couple of days ago, Walgreen Company (NYSE:WAG)’s wholly owned subsidiary Walgreens Boots Alliance announced the pricing of unsecured notes. The company intends to sell by November 20, £400 million of 2.875% notes due 2020, £300 million of 3.600% notes due 2025, and €750 million of 2.125% notes due 2026. After the offering is closed, Walgreen plans to change its structure into a holding company and to become a wholly-owned subsidiary of Walgreen Boots Alliance.
Andreas Halvorsen’s Viking Global is another shareholder of Walgreen. Viking owns 20.14 million shares as of the end of September, down by 3.97 million shares over the quarter.
Rosenstein’s Bet on eCommerce
eBay Inc (NASDAQ:EBAY) is next on the list. It is the second-largest long position in JANA’s equity portfolio and the second-largest holding on which the fund has been bullish. The fund significantly increased its exposure to eBay during the third quarter, adding 12.06 million shares and owns 13.06 million shares, valued at $739.77 million. JANA added the company to its equity portfolio during the first quarter of 2014 and initially held 3.85 million shares, but it cut the stake down to 1.0 million shares during the second quarter.
eBay’s stock has been growing during the first half of the year, but then it slid it currently trades 1% down year-to-date, one of the main reasons being the IPO of Alibaba Group Holding Ltd (NYSE:BABA), which captured a lot of attention from investors. However, eBay Inc (NASDAQ:EBAY)’s plans to spin-off its PayPal unit next year has made investors more optimistic about the company’s prospects. One of the main shareholders of the company is Carl Icahn, who has been seeking the spin-off since March 2014. Mr. Icahn also suggested that the best path for PayPal after it becomes a separate company is to combine with another player from the mobile payment segment. Also, a couple of weeks ago, Mr. Icahn accused eBay Inc (NASDAQ:EBAY)’s CEO John Donahoe of not pursuing the best interests of shareholders by spinning-off PayPal sooner, which, according to the investor, resulted in losses of $5 billion for the company’s shareholders. Mr. Icahn owns 30.80 million shares of eBay as of the end of the second quarter.
JANA Boosts Activist Stake in PetSmart
After initiating a stake during the second quarter, JANA Partners has further raised its position in PetSmart and currently owns 9.69 million shares, valued at $679.5 million. Aside from almost doubling its position over the quarter, Mr. Rosenstein has also sent a letter to the board of directors, in which he said that the company had resisted the proposal from JANA and other investors to review strategic alternatives, including the sale of the company. Moreover, the investor added that PetSmart had been trying to increase its short-term value, which could have a negative effect on the long-term value. This was the second letter that JANA sent to PetSmart this year, while in the first it asked the board to reconsider their decision to conduct a leveraged recapitalization of the company.
Moreover, earlier in September, PetSmart was considered one of the most-disliked large-cap stocks, on which investors had a consensus price target 9% below its value at that point. The stock however gained more ground since September. James A. Star’s Longview Asset Management is another shareholder of PetSmart holding approximately 8.93 million shares as of the end of September, up by 3,900 shares over the quarter.
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