The Latest on Engaged Capital’s Positions, Performance, and Activist Campaigns

#3 Rovi Corporation (NASDAQ:ROVI)

– Shares Owned by Engaged Capital (as of June 30): 2.45 Million

– Value of Holding (as of June 30): $38.32 Million

Rovi Corporation (NASDAQ:ROVI) was the only stock among Engaged Capital’s seven-largest equity holdings in which the fund increased its stake during the second quarter, by 200,000 shares. The fund revealed in its latest investor letter that Rovi’s current valuation doesn’t include “any impact from license renewals with two large customers who currently do not pay license fees.” The fund wants the company to not engage in any “value destructive” M&A, manage its cash in order to facilitate a share buyback program and reduce its costs “by stopping inefficient R&D spend and reducing corporate overheads.” Engaged Capital thinks that once these issues are sorted out, Rovi Corporation (NASDAQ:ROVI) should “re-present” itself to investors with a “clear long-term value proposition,” and augment its Board with “new directors with capital allocation/operating efficiency expertise.” Rovi Corporation’s stock saw a large spike in February after the company reported its fourth quarter earnings. Although the stock gave up all of those gains over the next few months, it has again seen a decent rally in the last two months and is currently trading up by 26.78% year-to-date. On August 28, analysts at B. Riley reiterated their ‘Buy’ rating and $31 price target on the stock.

#2 Benchmark Electronics, Inc. (NYSE:BHE)

– Shares Owned by Engaged Capital (as of June 30): 2.43 Million

– Value of Holding (as of June 30): $51.36 Million

Moving on, Engaged Capital kept its stake in Benchmark Electronics, Inc. (NYSE:BHE) unchanged during the second quarter. Shares of the Texas-based electronics equipment manufacturer have registered solid gains in the last couple of months and are currently trading up by over 16% year-to-date. According to analysts who track the company, Benchmark Electronics, Inc. (NYSE:BHE)’s stock could see further upside from here, as the market has yet to price in the company’s on-going transition to higher-value markets. Some analysts also think that downside in the stock is protected at current levels due to the company’s incrementally stable cash flows, strong balance sheet and a highly variable cost structure. Analysts are expecting the company to report EPS of $0.35 on revenue of $584.17 million for the third quarter. For the same quarter of the previous year, Benchmark Electronics pulled in EPS of $0.41 on revenue of $630.19 million. Hedge funds that initiated a stake in the company during the second quarter included Joshua Packwood and Schuster Tanger’s Radix Partners and David Brown‘s Hawk Ridge Management.

#1 Outerwall Inc (NASDAQ:OUTR)

– Shares Owned by Engaged Capital (as of June 30): 2.43 Million

– Value of Holding (as of June 30): $102.11 Million

Outerwall Inc (NASDAQ:OUTR) continued to remain Engaged Capital’s largest equity holding at the end of the second quarter. While the fund didn’t make any change to its stake in the company during the period, the 13.5% rise in Outerwall Inc (NASDAQ:OUTR)’s stock pushed up the value of its holding in the company by over $12 million. On July 25, Outerwall announced that it will be acquired by affiliates of Apollo Global Management (NYSE:APO) for $52 per share, following which its stock spiked very close to that $52 mark. Outerwall and Apollo Global Management (NYSE:APO)  expect the deal to be completed by the end of the third quarter. In its investor letter, Engaged Capital mentioned that the fund was persuading the company to sell itself during the second quarter and that if Outerwall would have refused to do so, the fund would have asked it to “institute a large dividend to force the market to value OUTR’s sizable cash flows.” Billionaire Jim Simons‘ Renaissance Technologies upped its stake in Outerwall by 45% to 465,900 shares during the second quarter.

Disclosure: None