| Christopher Hohn of TCI (Bloomberg) |
Hedge fund activists mostly posted strong results in the first quarter, led by Jeffrey Ubben’s ValueAct Capital and Christopher Hohn’s the Children’s Investment Fund Management (TCI).
San Francisco’s ValueAct rose 6.3 percent in the first three months of the year, driven by gains from Valeant Pharmaceuticals International and the Baker Hughes–Halliburton merger.
You can’t accuse Ubben of being a Valeant-come-lately investor like Pershing Square Capital Management’s William Ackman and some of the Tiger Cub crowd, which have been aggressively popping shares of the drug company in recent years.
Ubben, who likes to take 14 to 18 concentrated positions, discovered the stock more than nine years ago. And he has quietly worked with the the company to develop its current corporate strategy.
Since taking its initial stake in 2006, ValueAct has helped Valeant identify major cost savings and sell its pharmaceutical pipeline so it could focus on branded generics, which was a less volatile business. In 2008, ValueAct recruited J. Michael Pearson from consulting firm McKinsey & Co., where he had spent 23 years, to serve as chairman and chief executive officer of Valeant.
In 2010, Biovail Corp. acquired Valeant for $3.2 billion and retained the latter company’s name.
Ubben currently sits on the board of Valeant. ValueAct partner G. Mason Morfit sat on the Valeant board from 2007 to 2014, when he resigned just as the hedge fund scaled back its position in the stock. A few years ago ValueAct’s Brandon Boze was also on the board.
Last month, meanwhile, shareholders approved Halliburton Co.’s merger with Baker Hughes, although the deal has yet to close. The shares of the two energy services companies have held their own despite the oil price plunge. At the end of the fourth quarter, both stocks were among the 14 held by ValueAct.
London-based TCI is also off to a very strong start. The very concentrated fund, which has only ten individual holdings, was up 15 percent gross and 13 percent net in the first quarter.
Earlier this year it was reported that the fund had taken a “significant stake” in Aena, the Spanish airport owner and operator privatized by the government. TCI also received a seat on Aena’s board of directors. From the time the company went public in February through the end of March, the stock has surged about 60 percent.
Last year TCI made big profits on Red Eléctrica de España, which runs the electricity grid in Spain; Moody’s Investors Service, the New York–based credit ratings company; and Companhia Energética de São Paulo (CESP), which runs hydroelectric plants in Brazil.
Other activists did not perform nearly as well, although in a few cases their investors are not exactly complaining.
For example, Richard (Mick) McGuire III’s Marcato International Fund was up 4.75 percent in the quarter after climbing 2.3 percent in March.
Earlier this month, McGuire described the employee base at financial giant BNY Mellon as “bloated” and has said CEO Gerald Hassell should be replaced. “Bank of New York Mellon is simply not achieving its potential,” McGuire said in a March letter to Wesley W. von Schack, a nonmanagement director. “This is most easily observed by the persistent failure to achieve long-range earnings targets. Evidence of underperformance is also observable across a broad range of key performance measures including headcount growth, controllable expense levels, assets under custody growth, and investment servicing revenue growth.”
Nelson Peltz’s Trian Partners was up 2.5 percent for the quarter after losing about 1.7 percent in March. Trian is currently gearing up for its proxy fight with DuPont, whose annual meeting is scheduled for May 13.
We earlier reported that Ackman’s Pershing Square was up 3.5 percent in the first quarter. However, virtually all of the gains came in February.
Daniel Loeb’s Third Point Offshore fund, which is more of a multistrategy fund that sometimes engages in activism, rose 3.3 percent in March.
We earlier reported that Barry Rosenstein’s Jana Partners was up 1.1 percent in the first quarter.
