Here’s How Activist Watcher 13D Management’s 13F Holdings Are Doing

13D Management is a Nebraska-based fund that primarily invests in companies which are a target of shareholder activism. The fund was founded in December 2011 by Kenneth Squire, who also serves as the Chief Investment Strategist of the fund. Prior to starting the fund, Mr. Squire used to run a  subscription-based research company called 13D Monitor. At Insider Monkey we pay special attention to activist investors and the moves they make and since 13D Management acts as a proxy to measure the performance of activist investors as a group, we routinely track the fund’s performance. Our analysis of the fund’s 13F holdings in companies worth at least $1 billion shows that the 33 positions held by 13D Management delivered a weighted average return of 0.05% during the first quarter, which was nearly the same return that the broader market delivered during that period. In this post, we will be going through the top five moves made by the fund during the last quarter of 2015 and analyze how those stocks have performed so far this year.

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Cheniere Energy, Inc. (NYSEMKT:LNG)

– Shares Owned by Lone Pine Capital (as of December 31): 168,469 shares

– Value of Holding (as of December 31): $6.27 million

Let’s start with Cheniere Energy, Inc. (NYSEMKT:LNG), in which 13D Management initiated a stake during the fourth quarter itself. Michael Barnes and Arif Inayatullah also initiated a stake in the company during the same period, by purchasing 1 million shares. Cheniere Energy, Inc. (NYSEMKT:LNG)’s stock ended the first quarter down by 9.18%, but due to the gains it has registered so far this month, it is currently trading 2% in green year-to-date. At the end of February, the company announced that it had started shipping the first batch of LNG from the Sabine Pass, which led several analysts to upgrade the stock, including analysts at Goldman Sachs, who on February 23 upgraded the stock to a ‘Buy’ from ‘Neutral’ while keeping their price target on it unchanged at $46. However, in the past few weeks some analysts have raised concerns about Cheniere Energy, Inc.’s ability to continue exporting LNG considering that its break-even LNG pricing is in the range of $7.50-$8.50/MMBtu, whereas the current price of LNG in Europe and Asia is in the $4.20-$4.39/MMBtu range. Furthermore, owing to a potential increase in supply from Australia analysts expect the price of LNG in international markets to drop even further.

Baxter International Inc (NYSE:BAX)

– Shares Owned by Lone Pine Capital (as of December 31): 272,157 shares

– Value of Holding (as of December 31): $10.83 million

Baxter International Inc (NYSE:BAX) was another new addition to 13D Management’s portfolio during the fourth quarter. With ownership of 53.85 million shares of Baxter International Inc (NYSE:BAX), billionaire activist Dan Loeb‘s Third Point was the largest shareholder of the company at the end of 2015 among funds tracked by us. Like most other stocks, shares of Baxter International also started 2016 on a negative note. However, they quickly changed their trajectory and managed to end the first quarter with gains of 8%. In the past few months Baxter International has reduced its stake in Baxalta Inc (NYSE:BXLT), which it spun off last year, through debt-for-equity exchanges. After the completion of a secondary offering by Baxalta Inc (NYSE:BXLT) last month, Baxter International Inc’s stake in the company came down to 4.5% from 13.8%. However, Baxter International Inc plans to bring it down to zero in the coming months. On March 21, analysts at Leerink Partner upgraded the stock to ‘Outperform’ from ‘Market Perform’.

Mondelez International Inc (NASDAQ:MDLZ)

– Shares Owned by Lone Pine Capital (as of December 31): 243,755 shares

– Value of Holding (as of December 31): $10.93 million

Moving on, 13D Management reduced its stake in Mondelez International Inc (NASDAQ:MDLZ) by 39% during the fourth quarter. Mondelez International Inc (NASDAQ:MDLZ)’s stock fell by over 10% during the first three months of 2016 and according to some analysts, it can fall further in the coming months. They cite the one-time gain the company accrued during fiscal 2015 to hide its dismal earnings and the non-GAAP metrics it uses as the reason for their bearishness on the stock. For its first quarter of fiscal 2016  analysts are expecting the company to report EPS of $0.40 on revenue of $6.43 billion, lower than the EPS of $0.41 on revenue of $7.76 billion it delivered in the same quarter of the previous year. According to a recently submitted regulatory filing by activist Bill Ackman‘s Pershing Square, it now owns 23.36 million shares of the company, down from 43.36 million that it held at the end of December.

Brink’s Company (NYSE:BCO)

– Shares Owned by Lone Pine Capital (as of December 31): 390,859 shares

– Value of Holding (as of December 31): $11.28 million

Initiating a stake in Brink’s Company (NYSE:BCO) during the fourth quarter was a smart move by 13D Management. Owing largely to the over 10% rise they saw last month, shares of Brink’s Company (NYSE:BCO) ended the first quarter with gains of 16.8%. Brink’s Company currently pays a quarterly dividend of $1.10, which translates into an annual dividend yield of 1.10%. At the beginning of the year, the company announced that it had reached a deal with activist investor Jeffrey Smith’s Starboard Value LP, which owned 12.4% of all outstanding shares of the company directly and indirectly, as  of December 31. As part of the deal, the company agreed to add three candidates approved  by Starboard to its Board and announced that its CEO, Thomas Schievelbein, would step down.

Darden Restaurants, Inc. (NYSE:DRI)

– Shares Owned by Lone Pine Capital (as of December 31): 249,984 shares

– Value of Holding (as of December 31): $15.91 million

Finally, 13D Management reduced its stake in Darden Restaurants, Inc. (NYSE:DRI) by 39%  during the fourth quarter, relegating the company to the third spot in its equity portfolio from the top spot at the end of the third quarter. Activist Starboard Value owns 6.62 million shares of Darden Restaurants, according to a recent 13D filing (in 2014, Starboard replaced the entire board of the company and last year pushed for a spin-off of its real estate assets). Darden Restaurants, Inc. (NYSE:DRI)’s stock ended the first quarter with gains of 5%, but has given up some of those gains this month despite the company reporting better than expected numbers for its fiscal 2016 third quarter numbers on April 5. While analysts were expecting EPS of $1.19 on revenue of $1.84 billion for the quarter, Darden Restaurants declared EPS of $1.21 on revenue of $1.85 billion. Following the earnings release, on April 6,  analysts at BTIG Research reiterated their ‘Buy’ rating on the stock, but upped their price target on the stock to $75 from $70.

Disclosure: None