JANA Partners LLC is an event-driven hedge fund co-founded in 2001 by its current Managing Partner and Co-Portfolio Manager, billionaire Barry Rosenstein. The New York-based hedge fund primarily focuses on the public stock markets in the United States by employing different strategies such as an activist strategy, market-neutral strategy, and risk arbitrage strategy, among others. The portfolio of the respected activist investor is valued at $17.23 billion as of the end of the first quarter, an increase of 50% in its value over the quarter. Given that we know the importance of small-cap picks in the portfolios of investors, let’s take a look at JANA’s major small-cap holdings and how they assisted that first quarter growth. Some of the top small-cap holdings of JANA Partners are Starz (NASDAQ:STRZA), Lions Gate Entertainment Corp. (NYSE:LGF), Pinnacle Foods Inc. (NYSE:PF) and SUPERVALU Inc. (NYSE:SVU).
Rosenstein’s small-cap picks are notable to us given the fact that it’s investors like him who add great value to our small-cap strategy system, as they are heavily invested in the success of their small-cap picks and have poured considerable resources into identifying undervalued or under-the-radar companies to invest in. We have found that collectively, hedge funds’ top small-cap picks provide a great investment opportunity, with our strategy having returned over 144% since it was launched at the end of August, 2012 (see the details).
JANA Partners reported the acquisition of a new 7.50 million share stake in Starz (NASDAQ:STRZA), which is worth $257.96 million as of March 31. Although Starz’s stock achieved a spike of over 38% this year, it has the potential to keep rising during the upcoming months as the company continues to consistently beat earnings estimates. Looking at the most recent financial report, Starz (NASDAQ:STRZA) generated earnings per share of $0.79, easily beating the analysts’ estimates of $0.62 per share. The most recent estimates have been upgraded further, yet it is expected that the company will still outperform expectations. One of the major equity holders of the American premium cable and satellite television network company among the hedge funds we track is Naya Capital, founded by Masroor Siddiqui and Bruce Emery.
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The latest 13F filing shows that JANA Partners has also opened a new long position in Lions Gate Entertainment Corp. (NYSE:LGF). Rosenstein now holds an equity stake of 5.99 million shares valued at $203.32 million. The Vancouver-based entertainment company has recently reported poor financial results, failing to meet analysts’ estimates. During the recent quarter, the company generated adjusted earnings per share of $1.39 compared to the Zacks Consensus Estimate of $1.41. Nevertheless, the relatively poor financial performance did not stop Lions Gate from achieving an increase of 9% in its share price throughout the past two weeks. Mark Rachesky’s MHR Fund Management is one of the largest equity holders of Lions Gate Entertainment Corp. (NYSE:LGF), owning 40.27 million shares as of April 30, the position having been trimmed by nearly 11 million shares in April.
Another interesting move completed by JANA Partners was the purchase of a 4.94 million share stake in Pinnacle Foods Inc. (NYSE:PF), with the total value of Rosenstein’s position amounting to $201.5 million as of March 31. The New Jersey-based packaged foods company outperformed Wall Street’s expectations during the first quarter, delivering a solid financial performance by generating revenues of $665.3 million, exceeding the Zacks estimate of $663.8 million. When it comes to net profit, the company met the expectations by generating a profit of $0.35 per share during the quarter. The company’s stock has risen by nearly 20% since the beginning of the current year, but investors seem to believe there is yet more room for it to grow as numerous hedge funds, including John A. Levin’s Levin Capital Strategies and Nehal Chopra’s Ratan Capital Group, remain bullish on Pinnacle Foods Inc. (NYSE:PF).
JANA Partners sold more than half of its equity holdings in SUPERVALU Inc. (NYSE:SVU) during the first quarter, decreasing the fund’s stake to 12.36 million shares from 30.23 million shares, with the reduced position valued at $143.79 million at the end of the reporting quarter. It seems that the team of experts at JANA Partners made the right decision to cash out of a sizable part of their holdings in this company, since the stock has decreased by more than 27% over the past two months. However, as SUPERVALU’s shares have plummeted to $8.73 from a 2015 peak of $11.90, the stock might represent a good buying opportunity. SUPERVALU Inc. has a forward price-earnings ratio of 11.90, which is far lower than the food retail and distribution industry average of 21.89. This indicates that the wholesale grocer is highly undervalued in relation to its industry peers. Conan Laughlin’s North Tide Capital increased its position in SUPERVALU Inc. (NYSE:SVU) to 7.0 million shares during the first quarter, an increase of 500,000 shares.
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