Starboard Value’s Bullish Moves and Top Picks For 2016

#3 Yahoo! Inc. (NASDAQ:YHOO)

– Shares Owned by Starboard Value LP (as of December 31): 7.1 million

– Value of Holding (as of December 31): $236.28 million

Although Starboard Value didn’t make any changes to its stake in Yahoo! Inc. (NASDAQ:YHOO) during the fourth quarter, the company jumped two sports quarter-over-quarter to become the fund’s third top stock pick at the end of December. After Yahoo! Inc. (NASDAQ:YHOO) failed to spin-off its stake in Alibaba Group Holding Ltd (NYSE:BABA) due to concerns of massive tax liability, Starboard Value LP sent a letter to the company’s board last November asking it to start evaluating its core business instead. Since then the fund has sent several letters to the board and is even preparing for a proxy battle against the company. While it seemed the fund’s pleas were falling on deaf ears till a few weeks ago, that doesn’t seem to be the case anymore. Yahoo! Inc. recently revealed that it has hired financial advisers and also formed a committee of independent directors to evaluate and facilitate the selling of its core business. Jeffrey Tannenbaum’s Fir Tree increased its stake in Yahoo! by 26% to nearly 9.95 million shares during the October-December period.

#2 Advance Auto Parts, Inc. (NYSE:AAP)

– Shares Owned by Starboard Value LP (as of December 31): 1.71 million

– Value of Holding (as of December 31): $256.98 million

Starboard Value LP kept its holding in Advance Auto Parts, Inc. (NYSE:AAP) unchanged during the fourth quarter. The investor initiated a position in Advance Auto Parts, Inc. (NYSE:AAP) during the third quarter and immediately went activist. It asked the company to consider returning some cash to shareholders and also suggested that the stock could be worth $350 if it took steps to improve its margins. Unlike other companies, Advance Auto Parts, Inc. (NYSE:AAP) didn’t put up a fight with Starboard and reached an agreement with the fund on November 12. Under the terms of the agreement it agreed to oust its CEO and to expand its board to 13 from 12 and to include Jeffrey Smith as a director. In addition to that, the company also agreed to allow Starboard Value to nominate two additional directors at its 2016 annual meeting. For the fourth quarter, Advance Auto Parts posted EPS of $1.22, beating the estimates of $1.20, but the revenue of $2.03 billion was slightly lower than the $2.03 billion expected by the Street. Following the results, analysts at Deutsche Bank reiterated their ‘Buy’ rating on the stock, while upping their price target to $190 from $175. Steve Cohen‘s Point72 Asset Management initiated  a stake in the company during the fourth quarter by purchasing over 1.45 million shares.

 #1 Darden Restaurants, Inc. (NYSE:DRI)

– Shares Owned by Starboard Value LP (as of December 31): 11.64 million

– Value of Holding (as of December 31): $740.45 million

Despite the heavy decline its stock suffered after it spun off Four Corners Property Trust Inc (NYSE:FCPT) in November, Darden Restaurants, Inc. (NYSE:DRI) remained Starboard Value LP’s top pick going into 2016. However, according to its recent filings the fund has been reducing its stake in Darden Restaurants, Inc. (NYSE:DRI). On February 5, it disclosed that it plans to sell 2.7 million shares of the company to bring its total holding down to nearly 5.15% of all outstanding shares of Darden Restaurants. For its fiscal 2016 third quarter, analysts are expecting the company to report EPS of $1.06 on revenue of $1.80 billion, compared to EPS of $0.99 on revenue of $1.73 billion it delivered in the same quarter of the previous year. On February 16, analysts at Maxim Group reiterated their ‘Buy’ rating on the stock, but lowered their price target to $70 from $73. David Costen Haley‘s HBK Investments increased its stake in Darden Restaurants by 44% to 817,000 shares during the fourth quarter.

Disclosure: None