Activist Keith Meister Discusses Mergers, Active Management, Pandora, and More

New York City-based hedge fund Corvex Capital is run by activist investor Keith Meister, a 41-year old Harvard graduate who has worked with legendary activist Carl Icahn. Corvex Capital manages a U.S. public equity portfolio with over $12.6 billion in positions according to the fund’s 13F filing for the June 30 reporting period.

During a recent episode of CNBC’s “Fast Money: Halftime Report”, Meister talked about Yum! Brands, Inc. (NYSE:YUM), Pandora Media Inc (NYSE:P), Tesla Motors Inc (NASDAQ:TSLA), Twitter Inc (NYSE:TWTR) and Williams Companies Inc (NYSE:WMB). Let’s take a look at some of the most intriguing comments made by Mr. Meister about these companies.

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Yum! Brands Will Have a Competitive Advantage in China

Keith Meister believes that Yum! Brands, Inc.  (NYSE:YUM) will keep growing its brand, which will provide investment opportunities for entrepreneurs. Mr. Meister thinks the spin-off of Yum’s Chinese operations is a classic example of “one plus one equaling more than two.” Yum’s China business should trade at 10-to-12-times EBITDA, according to Meister, as a lot of other restaurants whose performance is not as good as Yum’s are trading at 10-times. Meister admitted that Yum has faced problems in China, but that the main reason for it performance lag there was the economic conditions in the country. He believes Yum China is going to have a huge competitive advantage and huge growth potential.

Yum Brands announced this month that it would spin-off its China operations through a distribution of common shares to its shareholders. The decision comes after Corvex Management pressured the company’s board last year to split its business. Of the 749 hedge funds that we track which filed 13Fs for the June quarter, 46 were bullish on Yum! Brands, Inc.  (NYSE:YUM) on June 30.

Pandora Media is Highly Valuable

Keith Meister’s hedge fund owns about a 10% stake in California-based music streaming company Pandora Media Inc (NYSE:P) and Meister thinks that Pandora remains a valuable option in his portfolio as more and more companies are looking to integrate music into their businesses. He said that he likes owning Pandora because of the company’s large user base and growth prospects.

“If you have 80 million users like Pandora does in the U.S. alone who use Internet radio, who will now use the $5 product, as well as the on-demand $10 product, that’s a hugely valuable piece of property for someone who wants to win in the music business,” Meister said.

Meister is also excited about Pandora’s analyst meeting scheduled for next week, as he thinks the company will reveal its five-year plan, and new products and services. As of the end of the June quarter, 46 funds tracked by Insider Monkey were long Pandora Media Inc (NYSE:P).

Move to the next page to see what Keith Meister said about Tesla, Twitter and Williams Companies.

Tesla Should Focus on its Core Business

Keith Meister thinks that Tesla Motors Inc (NASDAQ:TSLA)’s planned acquisition of SolarCity Corp (NASDAQ:SCTY) depicts “limited strategic rationale” because it comes at a time when the electric car maker should be focusing on its core business. In August, Tesla said that it had reached a deal to buy the energy services company for $2.6 billion. Meister said that being the largest electric car maker should seem like a full-time job. A total of 36 hedge funds in our database owned shares of Tesla Motors Inc (NASDAQ:TSLA) as of the conclusion of the second quarter.

Twitter’s Acquisition Fell Apart Because of Shareholders

One reason a Twitter Inc (NYSE:TWTR) sale could not be realized was that shareholders of its potential suitors, which reportedly included Alphabet Inc (NASDAQ:GOOGL), salesforce.com, inc. (NYSE:CRM) and Walt Disney Co (NYSE:DIS), were vocally opposed to their companies buying the social media firm. Meister thinks that companies in today’s capital markets listen to their shareholders, and that it is a “wonderful” thing. He said the management of each suitor had an active dialog with its shareholders over acquiring Twitter, and that they listened to the response they got, which was reluctance and questions over the feasibility of spending a large amount for the company. Meister believes that what happened in that scenario is a great example of one of the benefits of active management as opposed to passive. 30 hedge funds tracked by Insider Monkey were bullish on Twitter Inc (NYSE:TWTR) at the end of the second quarter.

Williams Companies Is Worth More as a Part of Another Entity

The founder of Corvex Capital also talked about Williams Companies Inc (NYSE:WMB), from whose Board of Directors he recently resigned. He said that the company has “undermaximized” its opportunities over the past five years and thinks that Williams Companies could be worth more as part of another entity. In August, Meister said he planned to nominate candidates to replace the pipeline company’s entire board. Meister left the board earlier this year after Williams’ failed deal to be acquired by Energy Energy Transfer Equity LP (NYSE:ETE). Eric W. Mandelblatt’s Soroban Capital Partners 21 million shares of Williams Companies Inc (NYSE:WMB).