JANA Partners kept making big changes to its portfolio in the third quarter as it continued to rebound from losses earlier in the year. Barry Rosenstein, JANA Partners (Bloomberg)
The New York hedge fund firm headed by Barry Rosenstein and best known for its activism liquidated four of its ten largest positions, according to a regulatory filing. They included one previously successful activist target, retailer Walgreens Boots Alliance, which was also JANA’s biggest long position for a while.
Altogether, JANA was running about $6.7 billion as of the end of July. In the September period it liquidated 16 individual stock positions and established 26 new ones, excluding puts and calls. It also retained 16 individual stocks, cutting its stake in some and adding to others.
Three of JANA’s new positions are high-profile Internet companies — Priceline Group, Twitter, and Yahoo — a move that attracted plenty of media attention. None of these stocks currently plays a prominent role in the portfolio, though. Of the three, Priceline is the top investment, ranking as the 13th-largest individual stock holding.
JANA declined to comment on the filing.
Investors and others might be tempted to make a big deal about the three Internet stocks, speculating that JANA is identifying them as potential activist targets. However, those who have followed the firm for some time know that JANA — like most other activists — rarely or never goes public with a new activist position in a stock it had earlier publicly disclosed as holding in a regulatory filing. So don’t get too excited over these three.
The Priceline, Twitter, and Yahoo positions are merely part of a recent effort by JANA, which is more of a value investor that is known to take activist stakes, to become nimbler as it works hard to overcome a recent string of mostly monthly losses.
The firm began this push in the second quarter, when it established 24 new single-stock positions, excluding puts and calls, and liquidated 18 of its holdings, leaving just eight stocks that it had held in March.
These bold moves seem to have worked. As we reported earlier, JANA’s main hedge fund, JANA Partners, lost just 0.9 percent for the year through October, while JANA Nirvana, a more aggressive fund, was off 1.2 percent. At the end of June, JANA was down 5.8 percent or 5.9 percent year to date, depending on the portfolio; JANA Nirvana had lost 8.6 percent. Last year JANA finished down more than 5 percent.
In any case, in the third quarter JANA trimmed its stake in its two largest longs: conglomerate ConAgra Foods and Liberty Broadband Corp., which owns media properties and became the firm’s No. 2 long in the second quarter, when it established a new position in the stock.
Now that JANA has unloaded drugstore titan Walgreen Co., formerly its third-largest individual stock long, advisory firm Willis Towers Watson occupies that spot. The latter was a new position in the second quarter.
JANA’s No. 4 position is HD Supply Holdings, a distributor of industrial products that several weeks ago became JANA’s newest activist target. This is just the latest example of the firm not telegraphing its activist position in advance.
As a hedge, JANA also increased more than sevenfold its position in put options on the SPDR S&P 500 ETF Trust, an exchange-traded fund that bets on the direction of the Standard & Poor’s 500 stock index.
Besides Walgreens, the other top ten positions liquidated in the third quarter were online travel agency Expedia, software giant Microsoft Corp., and Pinnacle Foods, the packaged foods company. JANA’s largest new single-stock long is Universal Health Services, one of the biggest U.S. hospital management companies.
It will be interesting to see whether this shake-up of JANA’s portfolio has the same positive impact on performance as the second-quarter changes did.
