Jeffrey Ubben is an activist investor, but a patient one; rather than agitate for immediate change and use the media to increase pressure on management, his preferred strategy is to take a large stake in an underappreciated company and carefully work with management- though with an eye towards good corporate governance- to unlock shareholder value. Ubben managed money at Fidelity and at Blum Capital Partners before founding ValueAct Capital in 2000.
ValueAct is appropriately named: it is a value investor first, and only if that value doesn’t show up and the fund remains convinced that the business is high quality does it turn towards activism. Board members aren’t always informed enough to challenge management on business strategy- or are not inclined to do so- and so Ubben likes to grab Board seats and serve as a voice of opposition. ValueAct tends to invest in focused midcap companies in a variety of industries.
In its most recent 13F filing, ValueAct only reported owning 13 stocks with two of those positions being very small. Most of its stakes were worth over $400 million, including three that were about 41 billion or more. Because of the fund’s longer term strategy it makes very few new investments and percentage changes in its holdings tend to be small; it also tends to own stocks for years. Read on to learn more about its five largest holdings or see the rest of Ubben’s stock picks.
Motorola Solutions Inc (NYSE:MSI). ValueAct owned about 29 million shares of the communications equipment company formed from the spinout of Motorola Mobility Holdings in early 2011 (our database of 13F filings shows that that is about when Ubben and his team started buying in). Motorola trades at 15 times consensus earnings for 2013. Billionaire George Soros increased his own stake in Motorola last quarter to a total of 2.9 million shares (check out more stocks Soros was buying).
Adobe Systems Incorporated (NASDAQ:ADBE). The $19 billion market cap software company was another of ValueAct’s top picks, with the fund owning 31 million shares at the end of September. D.E. Shaw, a large hedge fund managed by billionaire David Shaw, cut its stake but still reported a position of 1.2 million shares (find more stocks D.E. Shaw owns). The trailing P/E multiple is 23, but in its most recent quarter Adobe reported 28% earnings growth compared to the same period in the previous year.
Valeant Pharmaceuticals Intl Inc (NYSE:VRX). ValueAct owned close to 18 million shares here, a position worth nearly $1 billion at the time. Tiger Cub Andreas Halvorsen’s Viking Global was another major holder of the stock. Valeant’s products include treatments for neurological and dermatological conditions. While the company doesn’t seem to have been performing particularly well on the bottom line recently, sales have been up.
Moody’s Corporation (NYSE:MCO). Ubben and his team had the second largest position in Moody’s at the end last quarter out of all the investors in our database of 13F filings; Warren Buffett’s Berkshire Hathaway owned over 28 million shares. See Warren Buffett’s favorite stocks. The company reported large increase in revenue and earnings in the third quarter compared to the same period in 2011, and carries earnings multiples in the teens.
CBRE Group Inc (NYSE:CBG). ValueAct reported almost 32 million shares of the $6.4 billion market cap real estate services company. The stock’s beta is 2.3 as its real estate related business leaves the company exposed to the broader economy. CBRE trades at 29 times trailing earnings, but Wall Street analysts expect that a stronger real estate market will drive growth and so the forward P/E is only 15. Ubben’s former employer, Blum Capital Partners, owned 15 million shares of the stock according to its own 13F.
