Activist investing seems to be in vogue nowadays. While shareholders welcome an activist investor’s ambitions to streamline the operations of companies to create more value, management of said companies often have a harder time swallowing their dose of the activism pill, as it often conflicts with their cushy status quo. Keith Meister is one such activist investor who is not exactly welcomed with open arms when shows up on the scene. Meister was the right-hand man of renowned activist Carl Icahn before he established Corvex Capital in March 2011, while another legendary investor, George Soros, has nearly a billion dollars invested in Meister’s fund. Corvex’s assets under management amount to $11 billion and the market value of its public equity portfolio stood at $8.27 billion at the end of the first quarter. We decided to take a closer look at the top new picks of his fund, Corvex Capital, some of which could become targets of his activism in the future. The list is headed by Endo International plc (NASDAQ:ENDP), Applied Materials, Inc. (NASDAQ:AMAT), MGM Resorts International (NYSE:MGM), CIT Group Inc. (NYSE:CIT), and Yum! Brands, Inc. (NYSE:YUM).
At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 144% and beating the market by more than 84 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise rather than large-cap stocks.
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Meister acquired some 1.27 million shares of Endo International plc (NASDAQ:ENDP) valued at $113.52 million during the first quarter. The stake represented 1.37% of the value of the fund’s public equity portfolio. So far this year Endo International plc (NASDAQ:ENDP)’s stock has delivered nearly 17% returns. The $14.97 billion drug manufacturer recently acquired the generic drug maker Par Pharmaceuticals from the private equity firm TPG in a cash-and-stock deal valued at $8 billion. Among other prominent stockholders of Endo International plc (NASDAQ:ENDP) is Ken Griffin‘s managed futures fund, Citadel Investment Group, with some 694,800 shares valued at $62.32 million.
The fund’s second-largest newly initiated equity holding consists of 4.0 million shares of Applied Materials, Inc. (NASDAQ:AMAT) valued at $90.24 million. The precision materials engineering company also earned the favor of Daniel S. Och‘s OZ Management and James Dinan‘s York Capital Management during the first quarter as they significantly increased their respective stakes in Applied Materials, Inc. (NASDAQ:AMAT) to 15.76 million shares valued at $355.46 million and 10.43 million shares valued at $303.46 million respectively. Although trading nearly sideways over the past year, Applied Materials, Inc. (NASDAQ:AMAT)’s stock has depreciated by 18.5% year-to-date.
