In this article, we discuss the top 5 stock picks of Barry Rosenstein’s JANA Partners. If you want our detailed analysis of these stocks, go directly to the Top 10 Stock Picks of Barry Rosenstein’s JANA Partners.
5. CyrusOne Inc. (NASDAQ:CONE)
JANA Partners’ Stake Value: $134,514,000
Percentage of JANA Partners’ 13F Portfolio: 10.76%
Number of Hedge Fund Holders: 27
CyrusOne Inc. (NASDAQ:CONE), a Texas-based real estate investment trust with interests in carrier-neutral data centers, colocation, and peering services, is one of the top stock picks of Barry Rosenstein’s JANA Partners. The hedge fund holds a $134.5 million position in CyrusOne Inc. (NASDAQ:CONE) as of the end of September, which accounts for 10.76% of the total Q3 securities at JANA Partners.
In the third quarter, 27 hedge funds in the database of Insider Monkey were bullish on CyrusOne Inc. (NASDAQ:CONE), with one of the leading company stakeholders being billionaire Israel Englander’s Millennium Management, holding 555,535 shares worth $43 million.
On October 29, Jefferies analyst Jonathan Petersen downgraded CyrusOne Inc. (NASDAQ:CONE) to Hold from Buy with a price target of $90.50, up from $88, after the company agreed to be acquired by KKR & Co. Inc. (NYSE:KKR) and Global Infrastructure Partners in a $15 billion deal, for $90.50 per share in cash.
CyrusOne Inc. (NASDAQ:CONE), on October 27, reported a Q3 FFO of $0.01, beating estimates by $0.03. The revenue jumped 15.72% year-over-year to $304.10 million, outperforming estimates by $13.95 million.
As of September, of the 27 hedge funds that were bullish on CyrusOne Inc. (NASDAQ:CONE), billionaire Ken Griffin’s Citadel Investment Group was one of the largest CyrusOne Inc. (NASDAQ:CONE) stakeholders, increasing its stake in the company by 10%, holding a $120.4 million position.
4. Encompass Health Corporation (NYSE:EHC)
JANA Partners’ Stake Value: $150,222,000
Percentage of JANA Partners’ 13F Portfolio: 12.01%
Number of Hedge Fund Holders: 44
Encompass Health Corporation (NYSE:EHC) manages a network of inpatient rehabilitation hospitals, home health agencies, and hospice agencies, offering facility-based and home-based post-acute services to patients in 36 American states and Puerto Rico. JANA Partners holds a $150.2 million stake in Encompass Health Corporation (NYSE:EHC) as of September 2021, which represents 12.01% of the hedge fund’s total investments.
Mizuho analyst Ann Hynes lowered the price target on Encompass Health Corporation (NYSE:EHC) on November 3 to $80 from $94 and kept a Buy rating on the shares. The analyst reduced estimates to reflect the elevated staffing challenges that are likely to persist into 2022 and will impact expenses in all Encompass Health Corporation (NYSE:EHC) segments.
Encompass Health Corporation (NYSE:EHC) published its third quarter results on October 27, posting earnings per share of $1.03, missing estimates by $0.03. The revenue totaled $1.28 billion, missing estimated revenue by $29.01 million.
44 hedge funds in the Q3 database maintained by Insider Monkey were bullish on Encompass Health Corporation (NYSE:EHC), holding total stakes worth approximately $708 million. One of the biggest Encompass Health Corporation (NYSE:EHC) stakeholders is Polar Capital, with 992,110 shares worth $74.4 million.
Here is what Madison Funds has to say about Encompass Health Corporation (NYSE:EHC) in its Q3 2021 investor letter:
“We also added to our investment in Encompass Health, a provider of inpatient rehabilitation and home health. We believe the company will soon separate into two entities; and that will unlock value for shareholders. This is one of our favorite management teams and we see significant opportunities for both companies. We also exited several underperforming investments in this sector as COVID continues to disrupt routine healthcare procedures.”
3. Vonage Holdings Corp. (NASDAQ:VG)
JANA Partners’ Stake Value: $162,339,000
Percentage of JANA Partners’ 13F Portfolio: 12.98%
Number of Hedge Fund Holders: 29
Vonage Holdings Corp. (NASDAQ:VG), a cloud based communications provider, represents 12.98% of the total investments at JANA Partners as of the third quarter, with the hedge fund holding more than 10 million shares of the company, worth $162.3 million.
Vonage Holdings Corp. (NASDAQ:VG) posted on November 4 its Q3 results. EPS in the period came in at $0.04, in line with analysts’ consensus estimates. The revenue increased 13.17% from the prior year quarter, reaching $358.34 million, surpassing estimates by $10.97 million.
It was reported on November 22 that the Swedish telecommunications giant, Ericsson, would acquire Vonage Holdings Corp. (NASDAQ:VG) for $6.2 billion in cash. Following this news, Citi analyst Michael Rollins on November 30 downgraded Vonage Holdings Corp. (NASDAQ:VG) to Neutral from Buy with an unchanged price target of $21. The analyst expects the deal to close under the currently agreed-upon terms between Ericsson and Vonage Holdings Corp. (NASDAQ:VG).
The largest Vonage Holdings Corp. (NASDAQ:VG) stakeholder is Park West Asset Management, with the hedge fund increasing its stake in the company by 32% in Q3, holding 12.58 million shares worth $202.9 million. Overall, 29 hedge funds were long Vonage Holdings Corp. (NASDAQ:VG) in Q3 2021, with total stakes amounting to $843 million.
Here is what Adestella Investment Management has to say about Vonage Holdings Corp. (NASDAQ:VG) in their Q4 2020 investor letter:
“Vonage (VG) – the VG thesis has largely played out as expected. The market has gradually shifted its focus from the declining consumer operations to the growing business ones, highlighted by the API unit. As its legacy home phone VOIP solutions continue to become a smaller and smaller portion of the overall pie, we think this trend will continue. If the API unit can continue to grow at 25-30%, that segment alone covers most of the enterprise value at just a ~6x sales multiple before giving any credit to the sizable UCaaS operations. The API unit’s closest comparable, Twilio (TWLO), currently trades at 31x sales, so it’s not unreasonable to think there’s upside to our estimate here. Shares have returned around 80% since our writeup (and slightly higher from our cost as we added in the weeks that followed), but we’ve maintained most of our position as the key growth drivers remain intact.”
2. TreeHouse Foods, Inc. (NYSE:THS)
JANA Partners’ Stake Value: $205,656,000
Percentage of JANA Partners’ 13F Portfolio: 16.45%
Number of Hedge Fund Holders: 20
Publishing its third quarter earnings report on November 8, TreeHouse Foods, Inc. (NYSE:THS) posted an EPS of $0.46, missing estimates by $0.04. The $1.10 billion revenue exceeded estimates by $20.24 million and gained 5.31% from the preceding year quarter.
TreeHouse Foods, Inc. (NYSE:THS) is an Illinois-based multinational food processing company that produces private labeled packaged food. In the third quarter of 2021, Barry Rosenstein increased his stake in TreeHouse Foods, Inc. (NYSE:THS) by 36%, holding 5.15 million shares worth $205.65 million. The stock accounts for 16.45% of the JANA Partners’ total Q3 investments.
TreeHouse Foods, Inc. (NYSE:THS) announced on November 8 that its board of directors has approved a plan to explore strategic alternatives, including a possible sale of the company or a transaction to allow the company to focus on its higher growth snacking and beverages business by divesting a significant portion of its meal prep business.
Of the 20 hedge funds that were bullish on TreeHouse Foods, Inc. (NYSE:THS) in Q3 2021, Jim Simons’ Renaissance Technologies is one of the leading stakeholders of the company, with 616,777 shares worth $24.59 million.
Here is what Palm Valley Capital has to say about TreeHouse Foods, Inc. (NYSE:THS) in its Q3 2021 investor letter:
“During the quarter, we purchased TreeHouse Foods (ticker: THS), the market leading provider of private label foods in the U.S. Since being spun out of Dean Foods in 2005, TreeHouse has been an aggressive acquirer, increasing its size tenfold from 2008 to 2016. Since 2017, the company shifted its strategy from acquiring to improving efficiency, service levels, and profitability. With investors expecting another year of growth and improvement, on August 5th, the company announced it was reducing its earnings guidance for 2021.
There were two items that dragged down expectations. First, the company suffered from an unexpected shift by consumers towards branded products and away from private labels. As government stimulus dollars have boosted incomes, TreeHouse’s management has seen shoppers trade up to branded products. The second contributing factor harming results has become a common theme throughout the food industry—escalating commodity, freight, labor, and packaging costs. Management called the inflationary environment “extraordinary” and is in the process of raising prices. While they expect demand for private label foods to improve as government stimulus fades, it will not be in time to save 2021’s results. Earnings growth will likely not return until early next year.
Based on historical results and our normalized operating margin estimate, we believe TreeHouse can generate $300 million of annual free cash flow. In our opinion, this is attractive relative to the company’s $2.1 billion market cap. While TreeHouse’s $1.9 billion in debt is near our high-end threshold for financial leverage, we believe a portion of future cash flow will be used to pay down debt and repurchase shares, reducing the company’s financial risk and increasing its intrinsic value per share. TreeHouse Foods is a market leader in a stable and growing industry, and we view it as a high-quality small cap business. After being on our possible buy list for many years, we were happy to see its stock price fall abruptly to a level below our calculated valuation.”
1. Conagra Brands, Inc. (NYSE:CAG)
JANA Partners’ Stake Value: $272,692,000
Percentage of JANA Partners’ 13F Portfolio: 21.81%
Number of Hedge Fund Holders: 20
Conagra Brands, Inc. (NYSE:CAG) is a holding company from Illinois, offering consumer packaged goods to supermarkets, restaurants, and food service establishments. JANA Partners holds more than 8 million shares of Conagra Brands, Inc. (NYSE:CAG) as of September end, worth $272.69 million, representing 21.81% of the fund’s total Q3 investments. Conagra Brands, Inc. (NYSE:CAG) is the largest holding in the hedge fund’s portfolio.
On October 7, Conagra Brands, Inc. (NYSE:CAG) posted its Q3 results, announcing earnings per share of $0.50, beating estimates by $0.02. The quarterly revenue was down 0.96% year-over-year, reaching $2.65 billion, exceeding estimates by $114.09 million.
JPMorgan analyst Ken Goldman on October 8 downgraded Conagra Brands, Inc. (NYSE:CAG) to Neutral from Overweight with a price target of $38, down from $41. The analyst sees “still plenty to like” about Conagra Brands, Inc. (NYSE:CAG) and stated the stock’s valuation remains “appealing.” However, he prefers to be on the sidelines until he can see greater upside to earnings.
Citadel Investment Group increased its stake in Conagra Brands, Inc. (NYSE:CAG) by 1700% in the third quarter, holding over 4 million shares worth $138.8 million. Overall, 20 funds in the database of 867 elite hedge funds maintained by Insider Monkey were long Conagra Brands, Inc. (NYSE:CAG) in Q3 2021, down from 29 funds in the prior quarter.
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