In a new filing with the Securities and Exchange Commission, Jeff Ubben‘s ValueAct Capital reported a new stake in the $25 billion oilfield services company Baker Hughes Incorporated (NYSE:BHI). ValueAct reported holding an activist stake in the company that amasses 21.95 million shares, which represent 5.1% of the outstanding common stock. The investor added in the filing that it may further alter its stake, but also may discuss with the management or directors of Baker Hughes, as well as other interest parties and propose different changes in the company’s operations’ governance or capitalization. So far, however, ValueAct did not specify any plans regarding its involvement in the current operations of Baker Hughes.
Mr. Ubben initiated its stake in the company a couple of days before Baker Hughes Incorporated (NYSE:BHI) reported its financial results for the fourth quarter and full year 2014. For last year, the company’s revenue amounted to $24.6 billion, which represents a 10% increase on the year. In addition its EBITDA and net income (non-GAAP basis), went up by 30% and 59% on the year respectively to $4.8 billion and $4.22 per share respectively. In addition, Baker Hughes beat the analyst consensus estimates, which represented EPS of $4.17 and revenue of $24.5 billion. Moreover, the stock of Baker Hughes outperformed its peers from the Oil & Gas Equipment and Services industry, returning 4.60% over the last 52 weeks, versus the average return for the industry of -12.60%.
Since Baker Hughes Incorporated (NYSE:BHI) reported its results earlier today, analysts haven’t yet presented their opinion regarding the company’s results and future prospects. However, earlier this year, Barclays and KeyCorp initiated coverage on the stock and set ‘Overweight’ and ‘Hold’ ratings. Among other analysts in aggregate, Baker Hughes’ stock has a consesus ‘Buy’ rating and a price target of $76.00, which is a significant premium over the current price of around $56.80.
However, as the stock of Baker Hughes Incorporated (NYSE:BHI) advanced by more than 18% over the first nine months of 2014, investors have in aggregate trimmed their exposure to the stock. As our data show, out of around 700 investors that we track, a total of 60 funds disclosed long positions in Baker Hughes as of the end of September, versus 63 funds in the previous quarter. The aggregate value of the stakes held by the funds that we follow has also declined by $232.31 million to $3.85 billion. After adding a 5.1% stake, ValueAct is the largest shareholder of Baker Hughes among investors that we track. In addition, at the end of September, Edgar Wachenheim’s Greenhaven Associates reported 9.17 million shares, down by 2% on the quarter. On the other hand, Ken Griffin’s Citadel Investment Group and Israel Englander’s Millennium Management raised their stakes by 19% and 68% respectively to 6.38 million shares and 6.16 million shares respectively. However, the company amasses over 11% of Greenhaven’s equity portfolio, while in Citadel and Millennium’s portfolios, the positions represent 0.52% and 1.01% respectively.
With an equity portfolio of over $14 billion, ValueAct is one of the top activist hedge funds founded by former former managing partner at Richard Blum‘s Blum Capital Partners. ValueAct follows a diverse strategy, but it always keeps a concentrated portfolio of publicly-traded stocks. Usually, Mr. Ubben pursues an activist strategy by appointing his representatives on the company’s board of directors, so we might expect this move regarding Baker Hughes Incorporated (NYSE:BHI) as well. So far, over the last several years, ValueAct has appointed directors on the boards of Microsoft Corporation (NASDAQ:MSFT) and Valeant Pharmaceuticals Intl Inc (NYSE:VRX). Earlier this year, the fund send a letter to Msci Inc (NYSE:MSCI)’s Lead Board Director Rodolphe M. Vallee, in which the investor expressed his frustration with the board rejecting ValueAct’s request to appoint their nominees to the board. ValueAct has been holding shares of MSCI for several years, in the last filing disclosing ownership of 9.31 million shares, equal to 8.3% of the company. The fund has also made some other moves recently, such as trimming its stake in Adobe Systems Incorporated (NASDAQ:ADBE) by 2.08 million shares to 21.79 million shares.
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