| Barry Rosenstein, JANA Partners (photo credit: Andrew Harrer/Bloomberg) |
Barry Rosenstein’s JANA Partners suffered its worst monthly loss in two years -- and it has its largest longs to thank for this huge setback.
The activist hedge fund firm posted a 3 percent loss in its flagship JANA Partners fund in February. As a result, it is down 0.80 percent for the year-to-date. JANA Nirvana lost 4.6 percent for the month and is now down 1.4 percent for the year-to-date.
Last month the Standard & Poor’s 500 stock index was off 1.1 percent, while the Dow Industrials fell 1.5 percent. JANA’s five largest disclosed U.S. long positions all fell much more than the widely followed indices.
For example, energy company EQT Corporation, JANA’s largest long position, fell about 7.3 percent last month. Zimmer Biomet Holdings, a maker of healthcare products and the hedge fund’s second-largest long, fell about 8.6 percent.
Tiffany, its third-largest long, fell about 5.3 percent last month. Industrial distributor HD Supply Holdings, its fourth largest long, fell 6.8 percent in February. Credit card processor First Data, its fifth-largest long, plunged nearly 12 percent last month.
It is not known which stocks JANA is short.
Back in January we reported that JANA was boosting its commitment to activism. It launched two new activist funds and said it was planning to devote more of its assets in the flagship funds to this strategy, according to its fourth quarter letter obtained by Alpha.
The two new funds are JANA Impact Capital, which emphasizes social responsibility investing, and JANA Strategic Investments Benchmark.
“As we approach the ninth year of the current bull market, and with passive index assets having more than quintupled since JANA began, it is clearer than ever that our key differentiating strength is our ability to bring about value-unlocking change through our shareholder activist skill set and resources, and that the market is more in need than ever of investors who actively monitor board and management performance," JANA said in the letter.
Since 2010 JANA has offered JANA Strategic Investments, which is a drawdown fund structured similarly to private equity funds.
JANA Strategic Investments Benchmark is similar to JANA Strategic Investments, but its structure more resembles a hedge fund, whereby the investor puts their capital in at once. The fund will invest all of the capital in activist situations. But it will invest any unused capital in the S&P 500 or equivalents.
JANA established 12 new positions in the fourth quarter and fully sold out of 15 positions. One of the new investments cracked the firm’s top-10 holdings list -- PTC, a software and services company.
In February JANA disclosed in a new 13D filing that it owned 7.3 percent of fast food chain Jack in the Box, asserting it believes the shares are undervalued and represent an attractive investment opportunity. JANA also said it had held discussions with the company regarding its capital structure, margins, capital allocation, franchise mix, and operations and may have further discussions which may also include governance and board composition. JANA also said it may take additional steps in the future, although it did not get specific.
JANA initially took a position in the stock in the third quarter and reduced its position in the fourth quarter. However, it has been aggressively buying shares since the beginning of January. The stock, currently the firm’s seventh largest long, fell 1 percent in February.
One bright spot last month was Bloomin’ Brands, another recently established activist position. It surged 4.8 percent in February. It is JANA’s sixth-largest long.
On Wednesday, the casual dining company best known for its Outback Steakhouse chain announced that it agreed to add Wendy Beck, a veteran finance executive with more than 25 years of experience, as a new independent director as part of an agreement with JANA. JANA also agreed to customary standstill and voting commitments.
“We are encouraged by the steps the company is taking, including appointing Wendy, and by the board’s ongoing commitment to create shareholder value,” said Rosenstein in a press release.
