Iridian Asset Management Loves These Tech Stocks

Iridian Asset Management, led by David Cohen and Harold Levy, disclosed 98 long positions in its latest 13F filing with the U.S. Securities and Exchange Commission (SEC) for the reporting period ended September 30. The value of the fund’s equity portfolio was at around $11.83 billion. David Cohen and Harold Levy are special situation investors focused on depressed stocks that are going through significant changes. The two founded Iridian Asset Management in 1996. As of the end of the third quarter, Iridian had around $12.7 billion assets under management. Previously, we’ve discussed Iridian’s top stock picks, let’s take a look at the fund’s top tech holdings.

Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by more than 53 percentage points since the end of August 2012. These stocks returned a cumulative of 102% vs. a 48.7% gain for the S&P 500 Index (see more details here). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).

#5 NCR Corporation (NYSE:NCR)

Shares held (as of September 30): 7,154,484

Total Value (as of September 30): $162.77 million

Percentage of Portfolio (as of September 30): 1.38%

NCR Corporation (NYSE:NCR) is a technology company, in which Iridian upped its stake by 15%. The company seems to have a solid financial position, as it posted income from operations of $168 million for the third quarter, up more than 300% compared to the last year. Revenue, however, slipped by 2% to $1.61 billion. During the last three months, shares of NCR Corporation (NYSE:NCR) have gained by 1.15%. At the end of the second quarter, the total number of hedge funds among those we track that were holding shares NCR Corporation jumped to 44, compared to 31 funds at the end of the first quarter, with the aggregate value of these investments dropped to $1.54 billion from $1.61 billion. Marcato Capital Management, run by Richard McGuire, held 10.85 million shares of the company at the end of June.

#4 HP Inc (NYSE:HPQ)

Shares held (as of September 30): 10,193,106

Total Value (as of September 30): $261.05 million

Percentage of Portfolio (as of September 30): 2.21%

Iridian increased its position in HP Inc (NYSE:HPQ) by around 6% during the quarter. Hewlett-Packard separated the company’s PC and printer business from software and enterprise division. Under the new plan, Hewlett Packard Enterprise will focus on the corporate hardware and service business, while HP Inc (NYSE:HPQ) will comprise of PC and printers business. Shares of HP Inc (NYSE:HPQ) have lost over 65% year-to-date. Another investor that loves HP is Richard S. Pzena’s Pzena Investment Management, which owns 19.14 million shares of the company as of the end of September.

On the next page, we’ll talk about Iridian’s three other top three picks, namely Pitney Bowes Inc. (NYSE:PBI), SanDisk Corporation (NASDAQ:SNDK), and Check Point Software Technologies Ltd. (NASDAQ:CHKP).

#3 Pitney Bowes Inc. (NYSE:PBI)

Shares held (as of September 30): 14,884,622

Total Value (as of September 30): $295.46 million

Percentage of Portfolio (as of September 30): 2.50%

Pitney Bowes Inc. (NYSE:PBI) is a $4.29-billion global technology company, in which Iridian upped its stake by 3%. For the third quarter, Pitney Bowes Inc. (NYSE:PBI) reported a 4% decline in revenue to $870 million, compared to prior year. Earnings per share for the quarter also dropped to $0.44, versus $0.65 in 2014. Pitney Bowes Inc. (NYSE:PBI) repurchased 4.9 million shares, worth $100 million, during the third quarter. The company’s stock has lost 12.72% year-to-date. First Eagle Investment Management held more than 7.0 million Pitney Bowes shares as of the end of June.

#2 SanDisk Corporation (NASDAQ:SNDK)

Shares held (as of September 30): 6,146,477

Total Value (as of September 30): $333.94 million

Percentage of Portfolio (as of September 30): 2.82%

Having a market cap of more than $15 billion, SanDisk Corporation (NASDAQ:SNDK) is engaged in flash storage business. SanDisk is the only top tech stock, in which Iridian cut its position during the third quarter. The fund’s stake represents a quarter-over-quarter decrease of 12%. Last month, Western Digital Corporation (NASDAQ: WDC) agreed to acquire SanDisk Corporation (NASDAQ:SNDK) in a cash and stock deal, valued at about $19 billion. The deal is expected to close in the third quarter next year. Shares of SanDisk Corporation (NASDAQ:SNDK) have declined by over 21% year-to-date. Another investor that believes in SanDisk is Michael Lowenstein’s Kensico Capital, holdings over 4 million shares.

#1 Check Point Software Technologies Ltd. (NASDAQ:CHKP)

Shares held (as of September 30): 5,253,165

Total Value (as of September 30): $416.73 million

Percent of Portfolio (as of September 30): 3.52%

Check Point Software Technologies Ltd. (NASDAQ:CHKP) is Iridian’s top tech pick. The investor was bullish on Check Point Software during the quarter, boosting its ownership by more than 64%. Check Point Software Technologies Ltd. (NASDAQ:CHKP) is engaged in information technology security business. The company posted strong financial results for the third quarter, with its revenue increasing to $404 million, from $370 million a year earlier. Operating income also rose to $205 million, versus $197 million in the same period of 2014. Shares of Check Point Software Technologies Ltd. (NASDAQ:CHKP) have gained 6.49% year-to-date. Check Point Software is also a favorite stock of David Blood and Al Gore’s Generation Investment Management, which held 5.81 million shares at the end of June.

Disclosure: none