David Cohen and Harold Levy co-founded a hedge fund called Iridian Asset Management, back in 1996, aiming to benefit from market fails at times of corporate change. The fund’s headquarters are in Westport, Connecticut, while also providing additional offices in NYC, Chicago and Schaumburg, Illinois. Both David Cohen and Harold Levy had impressive investing experiences prior to the launching of Iridian Asset Management, working at Arnhold and S. Bleichroedr Inc, and Lehman Brothers Kuhn Loeb. Harold Levy is a portfolio manager of the First Eagle Fund of America, and previously, he also worked for E.M. Warburg, Pincus & Company. He earned his BA in Economics from Wesleyan University and an MBA from the University of Chicago. Prior to co-founding Iridian Asset Management, David Cohen also worked at Furman Selz Mager Dietz & Birney, W.R. Family Associates, and Central National Gottesman. He graduated from Vassar College in 1977 with a BA in Economics, from New York University in 1978 with an MBA, and from the University of Miami School of Law in 1981 with a JD.
Iridian Asset Management’s investment philosophy is centered around the belief that although markets are often right in their stock evaluations, they frequently fail to do so for the companies that are going through some structural/corporate change. Not factoring the consequences of these changes in a longer run, markets often undervalue some companies, and Iridian Asset Management seeks to catch those companies on time and to invest in them. The fund looks for various catalysts in companies that could possibly improve their businesses and increase their values. Some of these catalysts could be – spin-offs, management changes, acquisitions, etc. Another important part of Iridian Asset Management’s strategy is its approach to a company it plans to invest in, as the fund values it as it is going to acquire the entire business. According to data from the end of December 2016, the fund managed $13.7 billion in assets.
It seems that the fund’s investment philosophy must be very sharp, as the fund had some positive returns throughout the years. Since 1998 through August 2014, Iridian Asset Management has gained 8.69% a year, compared to 4.54% for the S&P Index. And, as for the more recent return figures, its Iridian Charter Fund LP, for example, brought back an exquisite 28.78% in 2013, followed by 10.43% in 2014. Then, in 2015, it lost 4.05%, but came much stronger in the following year, achieving a 6.27% gain. In 2017 its return was even better amounting to 12.79%. Unfortunately, last year seemed to have been quite difficult, as, through October, Iridian Charter Fund LP lost 1.40%. The fund’s total return was of 242.24%, for a compound annual return of 10.57%. Its worst drawdown was 43.51.
Insider Monkey’s flagship strategy identifies the best performing 100 hedge funds at the end of each quarter and invests in their consensus stock picks. This way it is always invested in the best ideas of the best performing hedge funds and is able to generate much higher returns than the market. Since its inception in May 2014, our flagship strategy generated a cumulative return of 89%, beating the S&P 500 ETF (SPY) by 29 percentage points (see the details here).
On December 31, 2018, Iridian Asset Management’s equity portfolio was valued $7.46 billion, and it was very diversified. The third biggest position the fund held in Marathon Petroleum Corp (NYSE:MPC) counting 5.15 million shares with a value of $303.93 million, occupying 4.07% of the fund’s portfolio. Marathon Petroleum is a company that offers a variety of petroleum-related services, such as refining and transportation, and has a market cap of $44.92 billion. It is also one of the 30 Most Popular Stocks Among Hedge Funds. The company is trading at a price-to-earnings ratio of 17.25, and over the past six months, its stock lost 20.78%, having the closing price on February 21st of $64.66.
If you are interested to learn about some other positions and the changes the fund has made to its portfolio during the fourth quarter of 2018, just keep on reading on the next page.
At the end of the fourth quarter of 2018, the fund reported holding the largest stake in Anthem Inc (NYSE:ANTM), a health insurance company, previously known under the name WellPoint. After the fund had lowered its stake by 9%, the position counted 1.43 million shares outstanding with a value of $375.12 million, accounting for 5.02% of the fund’s portfolio. Anthem has a market cap of $81.42 billion and it is trading at a P/E ratio of 22.30. Over the past 12 months, the company’s stock gained 32.33%, and on February 21st, it had a closing price of $311.30. The stock seems to be gaining popularity among hedge funds slowly but steadily as 63 smart money investors from Insider Monkey’s table were bullish on this stock at the end of the third quarter of 2018, which is by 23% more than in one quarter earlier. For the full year 2018, Anthem reported adjusted net income of $15.89 per share, compared to a net income of $12.04 per share for the previous year, and total operating revenue of $91.34 billion, versus $89.06 billion in 2017.
The second largest position in the fund’s portfolio was in a timeshare company Wyndham Destinations Inc (NYSE:WYND). During the fourth quarter of 2018, the fund boosted its stake by 4% to 9.11 million shares, which were valued at $326.51 million. Wyndham Destinations has a market cap of $4.59 billion, while its price to earnings ratio is 12.11. At the moment of writing, the company’s stock is trading at $46.67.
Among the biggest new additions to the fund’s portfolio during Q4 of 2018, were AutoZone, Inc.(NYSE:AZO), Equitrans Midstream Corp (NYSE:ETRN), and Frontdoor Inc (NASDAQ:FTDR). In AutoZone, the largest US retailer of aftermarket automotive parts, the fund initiated a position that was worth $167.9 million, on the account of 200,277 shares outstanding. The company’s stock gained 17.5% over the last six months, having its closing price on February 21st of $906.33. AutoZone has a market cap of $22.98 billion, and it is trading at a price-to-earnings ratio of 21.81. There were 30 smart money investors from our table long the stock at the end of Q3 2018, down by 2 from the previous quarter. In Equiterans Midstream the fund established $119.66 million worth a position, by purchasing 5.98 million shares, and in Frontdoor the fund initiated a $65.71 million worth a position, on the account of 2.47 million shares outstanding.
Naturally, the fund also lost faith in some of the companies from its portfolio and decided to sell out its entire positions during the fourth quarter of 2018. Among the biggest positions the fund dropped were those in Whiting Petroleum Corp (NYSE:WLL), in which the fund previously held 1.93 million shares with a value of $102.35 million, in eBay Inc (NASDAQ:EBAY) whose 3.81 million shares that were worth $125,86 million the fund held, and in Owens Corning (NYSE:OC) in which the fund had a position worth $187.26 million, on the account of 3.45 million shares.
Disclosure: None
This article was originally published at Insider Monkey.
