Jeffrey Smith‘s Starboard Value is one of the most followed and well respected activist hedge funds out there, consistently spurring positive operational changes at companies that it invests in and driving shares higher, which is why the fund likes to use the term “operational activist” to describe itself. Perrigo Company plc (NYSE:PRGO) Rockwell Collins, Inc. (NYSE:COL) and Cognizant Technology Solutions Corp (NASDAQ:CTSH) were among Five Companies to Benefit from Starboard’s Involvement in 2017.
When Starboard Value makes moves, the market pays attention, as it did earlier this month when shares of Magellan Health Inc (NASDAQ:MGLN), one of the 11 Best Insurance Companies to Invest in, jumped by close to 8% on the day Starboard’s 9.8% stake in the health insurer was revealed. The fund could be considering advocating for a sale or changes among the company’s leadership as ways to increase the stock’s value a source told CNBC.
During Q3, Starboard added two new holdings to its 13F portfolio and unloaded four positions. That left the fund with just 14 long positions, as the number of holdings it owns continues to get scaled back, down from 22 a year earlier. Jeffrey Smith’s fund is more bullish on tech stocks than it’s been in five years, with them having 38.76% weighting in Starboard’s $3.9 billion 13F portfolio.
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On the next page we’ll dig into all of Starboard Value’s biggest Q3 moves and see how those stocks have performed so far in the fourth quarter.
Stocks Bought in Q3
Symantec Corporation (NASDAQ:SYMC)
– Shares Bought During Q3: 24.50 million
– Value of Holding (as of September 30): $521 million
– Q4 Return (through December 14): +1.36%
– Trailing P/E Ratio: 11.97
– Forward Dividend Yield: 1.39%
Starboard opened a huge new position in Symantec Corporation (NASDAQ:SYMC) in July and sought to shake up the company’s board by putting forth five nominees. In September, the two sides collaborated on a board refreshment plan that will see three of Starboard’s nominees gain seats, including Starboard managing member Peter Feld. However, while we’re big fans of Starboard, our analysis showed that the fund’s mid-cap picks like SYMC performed dreadfully between 2011 and 2017.
RPM International Inc. (NYSE:RPM)
– Shares Bought During Q3: 567,000
– Value of Holding (as of September 30): $77.62 million
– Q4 Return (through December 14): -6.93%
– Forward P/E Ratio: 16.38
– Forward Dividend Yield: 2.32%
Starboard made a big investment in RPM International Inc. (NYSE:RPM) last quarter, increasing the size of its holding by 90% after opening a small position in the coatings and sealants company during Q2. RPM increased its dividend by 9.4% in October, the 45th-straight year that it’s raised its annual dividend payouts.
Baxter International Inc. (NYSE:BAX)
– Shares Bought During Q3: 170,000
– Value of Holding (as of September 30): $56.08 million
– Q4 Return (through December 14): -14.77%
– Trailing P/E Ratio: 30.10
– Forward Dividend Yield: 1.16%
Starboard raised its Baxter International Inc. (NYSE:BAX) position by 30% during the third quarter. Baxter shares have gained over 60% since the middle of 2015, around the time Starboard first opened a position in the healthcare company.
Marvell Technology Group Ltd. (NASDAQ:MRVL)
– Shares Bought During Q3: 569,211
– Value of Holding (as of September 30): $662 million
– Q4 Return (through December 14): -20.31%
– Forward P/E Ratio: 10.53
– Forward Dividend Yield: 1.56%
Starboard made a small addition to its large Marvell Technology Group Ltd. (NASDAQ:MRVL) position in Q3 and has since added another 4.27 million shares in Q4 as Marvell shares have continued to slide. Jeffrey Smith pitched Marvell at the Capitalize for Kids investor conference in October, praising the company’s management team, its leading positions in every key market, and its big opportunity in 5G following its July acquisition of Cavium.
Stocks Sold in Q3
Macerich Company (NYSE:MAC)
– Shares Sold During Q3: 1.15 million
– Value of Holding (as of September 30): $0
– Q4 Return (through December 14): -13.60%
– Forward P/E Ratio: 62.04
– Forward Dividend Yield: 6.28%
Starboard Value closed three long positions during Q3, with the most valuable being its former stake in REIT Macerich Company (NYSE:MAC). Jeffrey Smith may have been considering a proxy contest against the mall operator which appears to have fizzled out in Q1 when Dan Loeb’s Third Point, a potential ally which had also sought a shakeup at the company, sold off its position. Starboard began liquidating its own stake in Q2 and sold out of the position completely a quarter later.
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