Barry Rosenstein‘s JANA Partners has significantly reduced its exposure to U.S securities. The fund has closed its positions in 49 stocks and reduced holdings in another 11 companies, according to the latest filing with the SEC. On the other hand, a total of 11 new positions were initiated and additional purchases were made on 11 previously held stocks. This has led to a drop in market value of the fund’s portfolio from $19.31 billion at the end of the third quarter to $10.7 billion at the close of the fourth quarter.
Barry Rosenstein started JANA Partners in 2001 with $17 million in assets under management. At the time his strongest backer was Leon Cooperman of Omega Advisors fame. Rosenstein’s major strategy was to use activism within the framework of hedge fund business to unlock value for the company’s shareholders. Rosenstein’s operating style is much more subtle and than other activists working in the field such as Carl Icahn of Icahn Capital LP, and still persuasive. His peers say that he comes in with a pair of velvet gloves rather than the hammer that usually accompanies Icahn.
Rosenstein’s top picks during the fourth quarter included Walgreens Boots Alliance Inc (NASDAQ:WBA), Hertz Global Holdings, Inc. (NYSE:HTZ), PetSmart, Inc. (NASDAQ:PETM), eBay Inc (NASDAQ:EBAY), and Ashland Inc (NYSE:ASH). Of these, only Walgreens Boots is a new position that the fund initiated, at least technically; the 13.75 million share stake of Walgreens Boots Alliance Inc (NASDAQ:WBA), which sent it right to the top of JANA’s portfolio in terms of value, was actually the result of his 12.50 million shares in Walgreen Company (NYSE:WAG) being converted into the new stock, plus an additional 10%. The new stake comprises 9.79% of the fund’s portfolio with a market value of $1.05 billion.
Rosenstein was appointed on the board of the former Walgreen Co. (WAG) to oversee the merger with the Switzerland-based Alliance boots, which was completed on December 31, 2014. The new company’s stock is up about 1.3% year-to-date. The drug store chain operator reported its first quarter earnings for fiscal year 2015 in late December. Earnings per share (EPS) beat estimates by $0.07 and stood at $0.81, while revenues were also better than expected and came in at $19.56 billion.
Rosenstein raised his stake in Hertz Global Holdings, Inc. (NYSE:HTZ) by 217% in the fourth quarter. The additions raised his fund’s total to 34.82 million shares valued at $868.42 million, which comprised of 8.12% of its portfolio value.
Shares of Hertz Global have been under pressure recently due to accounting issues and are down nearly 5.2% year-to-date. Rosenstein has however claimed that the car rental company could buy back as much as 20% of its shares to boost its stock price. Carl Icahn also has a significant stake in the company. He owns about 51.92 million shares valued at nearly $1.29 billion, according to the latest filing. He purchased 23.84 million shares of Hertz during the last quarter. Larry Robbins‘ Glenview Capital is another significant stake holder of the company, possessing 18.53 million shares valued at $462.26 million.
PetSmart, Inc. (NASDAQ:PETM) and Rosenstein have had quite a relationship during the last year. In a letter sent to the management of the provider of pet products and services, he advised them against leveraged recapitalization of the company. This was followed by JANA announcing they would nominate five candidates to be elected to PetSmart’s board of directors, who were later withdrawn when PetSmart agreed to be acquired by a group led by BC Partners for $83.00 per share.
After a 96% increase in Petsmart’s stake in the third quarter, JANA retained its holding at the same level during the fourth. As of the latest filing the stake stands at 9.69 million shares with a market value of $788.07 million. The position comprises 7.36% of JANA’s portfolio value.
eBay Inc (NASDAQ:EBAY)’s position received a major bump in the third quarter when Rosenstein increased his stake in the company by 1,206%. In the fourth quarter, the fund added another 387,710 shares to the position, which now comprises of 7.05% of JANA’s portfolio value, with 13.45 million shares valued at $754.86 million.
The e-commerce company finally decided to split off its online payment division, PayPal in late September last year, something which Icahn had been advocating since March last year, but which was fought off by eBay’s CEO John Donahoe at the time. Icahn, who is also a significant shareholder of eBay possessing nearly 46.27 million shares valued at $2.60 billion and representing 8.14% of his fund’s portfolio value, claimed that Donahoe wasted nearly $5 billion of shareholder’s money fighting him off on PayPal’s split. eBay’s stock has been up nearly 9.6% since the news of the spinoff reached the markets.
Ashland Inc (NYSE:ASH)’s position received a slight slashing during the fourth quarter as Rosenstein offloaded some 19,867 shares. The chemical company providing products, services and solutions to industries, now forms 6.55% of the fund’s portfolio value, up from 3.83% in the quarter, despite a marginal decrease in its shares. The reason being Rosenstein’s strategy to limit exposure to U.S securities which has led to dwindling market value of the fund’s invested portfolio.
Ashland is up nearly 5.8% since the beginning of this year. Although the company’s EPS for the first quarter earnings report beat estimates by $0.05 and stood at $1.46, the revenues missed by $50 million and amounted to $1.39 billion.
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