Activists Icahn and Ubben Take Profits Off the Table from Successful Campaigns, Plus 2 Other Activist Moves

Some players in the financial industry believe that most hedge fund managers like to advertise their stock picks, which might explain why hedge funds tend to move in packs on some occasions. This group movement is not necessarily bad for retail investors monitoring hedge funds, considering that the basket of most-owned stocks among hedge funds tends to outperform broader market benchmarks on a quarterly basis. Retail investors can monitor hedge fund activity by tracking 13D, 13G, or Form 4 filings, which usually offer useful insights about hedge funds’ stances on particular companies. The following article will discuss four such SEC filings submitted by several activist funds tracked by Insider Monkey.

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In a freshly-amended 13D filing, Glenn W. Welling’s Engaged Capital LLC disclosed owning 3.85 million shares of Magnachip Semiconductor Corp (NYSE:MX), which represent 11.1% of the company’s outstanding common stock. This is up from the 3.45 million-share position disclosed in the fund’s 13F filing for the October-to-December period. In February 2015, the South Korea-based chipmaker disclosed its restated financial results for fiscal years 2011 and 2012, as well as for the first three quarters of 2013, through a Form 10-K filing, after wrongly recognizing its revenue. In the second half of 2015, Engaged Capital claimed that Magnachip’s share price did not reflect the true value of its assets, mainly owing to the financial restatement process.

The designer and manufacturer of analog and mixed-signal semiconductor products generated net sales of $633.7 million in 2015, a decrease from $698.2 million in 2014 and $734.2 million in 2013. The decrease was mainly driven by lower demand for the company’s foundry services and the discontinuation of certain products by customers serving the smartphone market. Jonathan Lennon’s Pleasant Lake Partners, another activist invested in Magnachip Semiconductor Corp (NYSE:MX), has also stated its belief that the chipmaker was undervalued relative to its normalized earnings power and asset value. Shares of Magnachip are up by 7% over the past 12 months, after having gained nearly 2% year-to-date. The smart money sentiment towards Magnachip decreased in the final quarter of 2015, as the number of money managers with stakes in the troubled chipmaker declined to 14 from 21 quarter-over-quarter. Activist hedge fund Pleasant Lake Partners owns 3.42 million shares of Magnachip Semiconductor Corp (NYSE:MX) as of December 31.

Let’s head to the next two pages of this article, where we cover three separate SEC filings submitted by the widely-known funds ValueAct Capital and Icahn Capital, as well as one from a lesser known firm.

According to a Form 4 filing, Jeffrey Ubben’s ValueAct Capital has sold 1.31 million shares of Motorola Solutions Inc. (NYSE:MSI) since Thursday at a weighted average price of $71.17, trimming its overall holding in the company to 9.65 million shares. The popular hedge fund vehicle has been gradually cutting its stake in Motorola Solutions lately, after reporting ownership of 17.59 million shares of Motorola through the latest round of 13F filings. Friendly activist investor Jeffrey Ubben amassed a 10% stake in the Chicago-based telecommunications giant between 2011 and 2012, soon after technology company Motorola split into two separate companies. Mr. Ubben’s approach to shareholder activism has paid off handsomely, considering that the shares of Motorola Solutions Inc. (NYSE:MSI) have advanced by 63% over the past five years.

The provider of mission-critical communication infrastructure, devices, accessories, software, and services generated net sales of $5.70 billion in 2015, down from $5.88 billion in 2014. The decrease was mainly attributable to lower net sales in Europe and Africa, and Latin America, which were impacted by challenging macroeconomic conditions in Latin America and Eastern Europe, as well as by foreign exchange headwinds. Shares of Motorola Solutions are currently trading at 14.7-times expected earnings, somewhat above the forward P/E ratio of 11.8 for the Communications Equipment industry. There were 22 hedge funds in our database with stakes in Motorola at the end of the December quarter, compared to 27 registered at the end of the third quarter. William B. Gray’s Orbis Investment Management trimmed its position in Motorola Solutions Inc. (NYSE:MSI) by 12% during the fourth quarter to 13.05 million shares.

A recent 13D filing shows that Canyon Capital Advisors LLC, co-founded by Joshua Friedman and Mitchell Julis, has nominated three independent candidates for election to Ambac Financial Group Inc. (NASDAQ:AMBC)’s Board of Directors. Canyon Capital owns 2.01 million shares of Ambac as of December 31, as disclosed in the fund’s 13F for the December quarter. The public filing reveals Canyon’s discontent with the company’s “underperformance and lack of strategic direction under existing management”, thus urging for leadership changes at the financial services company. It should be noted that Canyon Capital represents an Ambac policyholder that has exposure to $376 million of the company’s bonds, and has been trying to force or persuade the bond insurer to accelerate the settlement of several billion dollars of policy claims.

Ambac Financial Group Inc. (NASDAQ:AMBC)’s management believes that “Canyon has a fundamental conflict of interest – its economic interests are aligned with certain creditors, not with shareholders.” Ambac further stated in the press release that: “We think Canyon’s campaign to place a hand-picked candidates on the Ambac Board is a thinly veiled maneuver designed to accelerate payments on its own creditor position, regardless of the consequences for the company, other creditors and shareholders.”

Shares of Ambac have declined by 37% over the past 52 weeks despite having gained 11% since the beginning of 2016. The number of hedge funds in our system with long positions in the bond insurer declined to 16 from 27 during the December quarter. William C. Martin’s Raging Capital Management increased its position in Ambac Financial Group Inc. (NASDAQ:AMBC) by 33% during the fourth quarter, ending the year with 1.59 million shares.

Let’s wrap up our discussion by examining a freshly-amended 13D filing submitted by Carl Icahn’s investment vehicle. According to the SEC filing, Icahn Capital L.P. currently owns a stake of 22.23 million shares in Hologic Inc. (NASDAQ:HOLX), which make up 7.83% of the company’s outstanding shares. This is down from the stake of 28.15 million shares disclosed in the latest quarterly 13F submitted by Mr. Icahn’s activist fund, as well as the 25.33 million shares disclosed in a 13D filing earlier this month. Hologic is a developer, manufacturer and supplier of diagnostics products, medical imaging systems and surgical products primarily focused on women’s health. The shares of the medical service and diagnostics company have advanced by 60% over the past two years, partially owing to activist involvement on the behalf of Mr. Icahn. Earlier this month, Jonathan Christodoro and Samuel Merksamer, two employees of Icahn Capital L.P., resigned from Hologic’s Board of Directors. Moreover, Mr. Icahn and his team decided not to replace the recently-resigned members of the Board.

Hologic Inc. (NASDAQ:HOLX) registered product sales of $587.2 million for the first quarter of fiscal year 2016 that ended December 26, which marked an increase of 7.4% year-over-year. The smart money sentiment towards Hologic declined in the fourth quarter of 2015, with the number of top money managers invested in the company dropping to 33 from 38 quarter-over-quarter. While Mr. Icahn has been gradually cashing out his firm’s holdings in Hologic Inc. (NASDAQ:HOLX), Jim Simons’ Renaissance Technologies acquired a new stake of 1.67 million shares in the company during the December quarter.

Disclosure: None