First Pacific Advisors Reveals Its Major Winners and Losers, Views on Shareholder Activism in Q1 Letter

Top Winners

#3 United Technologies Corporation (NYSE:UTX)

– Shares held by First Pacific Advisors LLC (as of December 31): 5.85 million

– Value of Holding (as of December 31): $562.12 million

Moving on, First Pacific Advisors increased its stake in United Technologies Corporation (NYSE:UTX) by 3% during the fourth quarter. Despite falling by 13% in the first few weeks of 2016, United Technologies Corporation’s stock managed to end the first quarter with a gain of nearly 5%. The stock continued its rally in April, but has lost some steam recently, after the company reported its first quarter numbers. While analysts were expecting United Technologies Corporation (NYSE:UTX) to report EPS of $1.39 on revenue of $13.18 billion for the quarter, the company beat their expectations by declaring EPS of $1.47 on revenue of $13.36 billion. On May 3, analysts at RBC Capital released a note in which they dropped their rating on the stock to ‘Sector Perform’ from ‘Outperform’ and also lowered their price target on it to $108 from $109. In their note, the analysts explained that when they had last upgraded United Technologies Corporation, it was because Honeywell International Inc. (NYSE:HON) was interested in acquiring the company, but recent actions by the latter suggest that it is no longer interested. That along with the stagnant underlying business outlook for United Technologies Corporation is what prompted them to downgrade the stock. Billionaire Ken Fisher‘s Fisher Asset Management increased its stake in the company by 2% to 8.37 million shares during the first quarter.

#2 Aon plc Class A Ordinary Shares (UK) (NYSE:AON)

 – Shares held by First Pacific Advisors LLC (as of December 31): 7.58 million

 – Value of Holding (as of December 31): $700 million

The stock of the British financial services firm Aon plc Class A Ordinary Shares (UK)(NYSE:AON) has been on a consistent uptrend since February, ending the first quarter up by 13.67%. It recently made its lifetime high of $106.78 and currently trades with year-to-date gains of 15%. Though this rise in the stock has been beneficial for the shareholders of the company, it has reduced the stock’s annual dividend yield to 1.25%, lowering its appeal to potential fixed income investors. On April 28, the company reported its first quarter numbers, declaring EPS of $1.35 on revenue of $2.80 billion versus analysts’ expectations of EPS of $1.33 on revenue of $2.88 billion. For the same quarter of the previous financial year, the company reported nearly identical EPS and revenue of $1.37 and $2.80 billion respectively. Following the earnings release, analysts at RBC Capital reiterated their ‘Outperform’ rating on the stock on May 2, while upping their price target on it to $114 from $105. Even though First Pacific Advisors increased its stake in the company by 3% during the fourth quarter, it still lagged behind Boykin Curry‘s Eagle Capital Management, which increased its stake in the company by 5% to 13.88 million shares during the same time, making it the largest shareholder of Aon plc Class A Ordinary Shares (UK) (NYSE:AON) in our database at the end of 2015.

#1 Oracle Corporation (NYSE:ORCL)

 – Shares held by First Pacific Advisors LLC (as of December 31): 24.18 million

 – Value of Holding (as of December 31): $883.48 million

The largest equity holding of First Pacific Advisors at the end of 2015 was Oracle Corporation (NYSE:ORCL), which also happened to be its biggest winner during the first quarter. Though the stock has given some of the 12.45% gains that it made during the first quarter back over the last two weeks, it is still trading up by 6.42% year-to-date, outperforming most of its old tech peers by a wide margin. The company recently made two acquisitions in the cloud space. On April 28, it acquired Textura (NYSE:TXTR) for $663 million, and then went ahead and acquired Opower (NYSE:OPWR) for approximately $532 million on May 2. Most analysts who track the company have appreciated these acquisitions and acknowledge that the company is making significant progress in the cloud space, especially in the areas of Software as a Service (SaaS) and Platform as a Service (PaaS). However, some of them feel that Oracle Corporation (NYSE:ORCL) still needs time to bridge the gap between its legacy revenue and cloud-related revenue, which they contend is the reason why its stock could see limited upside over the next few quarters. Brad Dunkley and Blair Levinsky‘s Waratah Capital Advisors initiated a stake in Oracle Corporation (NYSE:ORCL) during the first quarter, purchasing 68,100 shares of the company.

Disclosure: None