Ralph V. Whitworth’s Relational Investors reduced its stake in SPX Corporation (NYSE:SPW) by around 740,000 shares last Friday. According to the 13D Form filed with the U.S. Securities and Exchange Commission, the investment fund now holds 3.55 million common shares representing 8.64% of the company’s outstanding stock. This comes as little surprise, considering it has been reducing its exposure to SPX Corporation throughout 2014. In fact, it is the fourth time the firm has decreased its position in this equity since its last 13F filing on September 30, when it held 6.27 million shares.
Relational Investors, a privately owned asset management firm headquartered in San Diego, California, was founded in 1996 by Ralph V. Whitworth and David Batchelder. It is an activist investment fund, which favors strategic block investments, primarily in the information technology, industrials, consumer staples, and healthcare industries. The firm is always seeking to unlock value from underperforming companies by engaging in productive discussions with management and shareholders in an attempt to generate positive change and long-term growth. If the equity in question responds well to the fund’s proposals, it typically increases its holdings, as it did with SPX Corporation in 2013.
Despite its successful investment strategy, last October, Relational Investors announced its intention to dissolve the firm, which currently boasts an equity portfolio valued at around $4.0 billion. Due to the absence of Mr. Whitworth, who has been dealing with health issues, numerous investors lost their confidence in the fund. Furthermore, Mr. Whitworth was required to spend most of his time at the firm as stipulated in the contracts signed with investors. Since this was not possible, clients would be entitled to withdraw their money immediately. Hence, Relational Investors discarded its initial plan to continue managing its current holdings, opting to gradually decrease its positions instead.
Apart from reducing its exposure to SPX Corporation (NYSE:SPW), the firm has been selling shares of all its other top picks, including Hewlett-Packard Company (NYSE:HPQ), Hologic, Inc. (NASDAQ:HOLX), and Mondelez International Inc (NASDAQ:MDLZ). Although this trend is expected to continue until Relational Investors is dissolved, it is rumored that some of its executives already have plans to found a new fund this year.
SPX Corporation (NYSE:SPW) is a $3.36 billion market cap industrial goods manufacturer, providing specialized engineered solutions on a global scale. The company’s operations are divided into the Flow Technology, and Thermal Equipment and Services segments. The first is focused on manufacturing and marketing products and solutions used to process, blend, filter, dry, meter, and transport fluids for original equipment installation. The latter specializes in engineering, designing, manufacturing, and installing thermal heat transfer products, catering to power generation, HVAC, and industrial markets. The Charlotte, North Carolina-based company was founded in 1911 and was previously known as Piston Ring Company, before changing its name to SPX Corporation in 1998.
Although SPX Corporation (NYSE:SPW)’s last quarterly results were formidable, the price of its stock has been declining steadily over the past year, losing around 22% of its value. One of the reasons could be that Relational Investors has been steadily decreasing its position in the company, selling large amounts of shares since March 2014. After all, Mr. Whitworth’s asset management firm is SPX Corporation’s largest institutional investor, holding an important activist stake. Nevertheless, the investment fund’s reasons for gradually reducing its exposure to the company are no mystery, and are certainly not related to a bearish stance towards the stock.
Numerous institutional investors continue to hold large positions in SPX Corporation, displaying optimism regarding the company’s future performance. Joel Greenblatt’s Gotham Asset Management for example held 674,700 shares as of the end of the third quarter, after increasing its stake by 53%. Cliff Asness’ AQR Capital Management is also bullish, boasting a position amounting to 391,900 shares at the end of the same period. Ken Griffin’s Citadel Investment Group on the other hand has been reducing its exposure to SPX Corporation, disclosing a stake of 178,900 shares at the close of the third quarter, a reduction in its holdings of 46%.
Disclosure: Pablo Erbar holds no position in any stocks or funds mentioned.
