Does Iridian Asset Management See Corporate Change Catapulting These Stocks Forward?

Iridian Asset Management was founded in 1996 by David Cohen and Harold Levy, with the goal of profiting from market inefficiencies in the wake of corporate change. The fund’s investment philosophy is grounded in the fact that the market occasionally fails to factor in the long-term implications of dramatic structural changes in a company. Once drawn to these stocks, the fund then employs its bottom-up, value-based, fundamental research approach to identify the targets that are most likely to benefit from these transitions long-term. The fund had $15.7 billion in assets under management on March 31, at which time its public equity portfolio contained $11.76 billion in holdings. The fund’s unique strategy warrants a look at its top holdings, which we’ll do in this article.

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#5 Tyson Foods, Inc. (NYSE:TSN)

 – Shares Owned by Iridian (as of March 31): 7.63 Million

 – Value of Holding (as of March 31): $508.75 Million

Iridian’s Tyson Foods, Inc. (NYSE:TSN) position constituted about 2.6% of the food production company’s outstanding float after being slashed by 20% in the first quarter. Tyson Foods, Inc. (NYSE:TSN) not only managed to beat both the top and bottom-line estimates with its financial results for the second quarter of fiscal year 2016, ending March 31, it also emerged victorious from its legal battle with Parks LLC over the use of the phrase ‘Park’s Finest’ to describe a line of hot dogs made by Tyson’s Hillshire Brands unit. Shares of Tyson Foods have rallied by a hefty 28% this year on the bevy of positive news. First Eagle Investment Management, led by Mehdi Mahmud, also reduced its stake in Tyson Foods during the first quarter, by 7% to 2.8 million shares.

#4 Wyndham Worldwide Corporation (NYSE:WYN)

 – Shares Owned by Iridian (as of March 31): 6.68 Million

 – Value of Holding (as of March 31): $510.67 Million

Iridian’s Wyndham holding was trimmed by 2% during the first quarter and represented about 4.3% of the fund’s equity portfolio on March 31. Wyndham’s stock surged from early-February through mid-March, kickstarted by the company’s fourth quarter results released on February 9. However, it wasn’t as lucky with its recently released first quarter results, which sent shares down by almost 10% on April 26. Wyndham Worldwide Corporation (NYSE:WYN) reported earnings of $1.12 per share on revenue of $1.3 billion for the quarter, beating EPS estimates by $0.01, but missing revenue expectations by $10 million. While the hotel brand is about to lose its grip on being the largest in the world once the Starwood Hotels & Resorts Worldwide Inc (NYSE:HOT)/Marriott International Inc (NASDAQ:MAR) merger is completed later this year, analysts still believe the company has room for growth. David Harding‘s Winton Capital Management held about 221,000 shares of Wyndham Worldwide Corporation (NYSE:WYN) after reducing its stake by 52% during the March quarter.

Iridian’s top-3 stock picks are analyzed on the second page.

#3 Lowe’s Companies, Inc. (NYSE:LOW)

 – Shares Owned by Iridian (as of March 31): 7.25 Million

 – Value of Holding (as of March 31): $549.40 Million

Iridian has held a stake in Lowe’s Companies, Inc. (NYSE:LOW) since the first quarter of 2013 and raised it by 1% during the January-to-March period. After slumping by nearly 17% between January and mid-February, shares of the $68 billion home improvement retailer have been on a steady rise, recouping most of the earlier losses. Four years after its efforts prompted political backlash, Lowe’s Companies, Inc. (NYSE:LOW) once again made a bid for Canadian home improvement retailer Rona in February, to the tune of $2.3 billion. The deal is expected to go through this time and the company plans to use the proceeds from a series of notes to fund the acquisition. Edgar Wachenheim‘s Greenhaven Associates decreased its stake in Lowe’s by 7% to 8.85 million shares during the first trimester.

#2 Delta Air Lines, Inc. (NYSE:DAL)

 – Shares Owned by Iridian (as of March 31): 11.62 Million

 – Value of Holding (as of March 31): $565.75 Million

Iridian cut its stake in Delta Air Lines, Inc. (NYSE:DAL) by 3% to 11.62 million shares during the March quarter. The $33 billion airline company got caught up in a recent industry-wide rout, with its shares being down by 13% since the beginning of April. Many major airlines reported that they expected unit revenue to decline in the second quarter, sparking the sell-off, and reported much worse passenger revenue per available seat mile (PRASM) than expectations. However, Delta’s PRASM decline of 4.6% was only slightly worse than the bottom-end of the guidance of a 2.5%-to-4.5% decline. Moreover, its first quarter earnings of $1.32 per share beat analysts’ estimates by $0.02. Thomas E. Claugus‘ GMT Capital reduced its stake in Delta Air Lines, Inc. (NYSE:DAL) by 7% to 4.39 million shares during the March quarter.

#1 Sealed Air Corp (NYSE:SEE)

 – Shares Owned by Iridian (as of March 31): 12.42 Million

 – Value of Holding (as of March 31): $596.31 Million

After the addition of about 28,700 shares to its holding during the first three months of the year, Iridian’s stake in Sealed Air Corp (NYSE:SEE) amassed about 5.9% of the company’s outstanding shares. The stock price of the Charlotte-based company, which is engaged in food safety and security, facility hygiene, and product protection, has risen by 4.6% on a year-to-date basis. While Sealed Air beat bottom-line expectations with its first quarter financial results released on April 28, it missed out on the expected top-line figure. Ian Simm’s Impax Asset Management is upbeat about the company, as it hiked its Sealed Air Corp (NYSE:SEE) holding by 39% to 365,300 shares during the first quarter.

Disclosure: None