Jana Partners is an event driven hedge fund managed by Barry Rosenstein, who founded it in 2001. Mr. Rosenstein started working for Merrill Lynch, ant then ran Sagaponack Partners (a private equity firm), before he opened his own fund. His strategy is defined by assessing a company’s value plus its growth catalysts . Value, for Rosenstein, means “basic industry companies, easily understandable business models, recurring revenue streams and, better, tipically cheap (…) after-tax free cash flow” (Pensions&Investments)
In 2007, Jana Partners returned just 7.9%, followed by a 23.4% loss for 2008. The fund was able to bring in returns of 23.9% in 2009, but it still wasn’t enough to recoup its 2008 losses. Jana Partners turned things around in 2010, recovering its 2008 losses and returning 8.4%. The strong performance continued. By October 2011, Jana Partners had returned a whopping 200% since its inception.
As Mr. Rosenstein recently declared, several factors make this a very good moment “for event driven investing and particularly activism. You’ve got companies with very healthy balance sheets today, sitting on record levels of cash; you’ve got financing rates at record lows, the whole financial system y much healthier, with less leverage, and then, you combine that with the fact that companies are still having difficulties generating internal growth, and so boards and management teams are more receptive to the kind of value creating ideas that we propose. And shareholders are more receptive as well.” In addition, Mr. Rosenstein states, there has been a remarkable increase in the interest in collaboration from institutional shareholders when he is working on an activist campaign (Pensions&Investments).
In this context, we will take a look into six companies of which Jana holds a big chunk of stock, in which it might go activist soon.
AerCap Holdings N.V. (NYSE:AER) is a $10.1 billion market cap aircraft leasing & an aviation finance services provider. During the first quarter, Jana Partners started a position in the company with 9.89 million shares, worth about $415 million. This stake makes it the largest hedge fund shareholder (amongst the 700 funds that we track) at the company, trailed by Robert Pitts’ Steadfast Capital Management, which more than doubled its bets on AerCap, to 2.63 million shares.
Jana also holds a big position at Mallinckrodt PLC (NYSE:MNK), a global specialty pharmaceuticals company. Although the fund last declared having reduced its exposure by 1%, its 3.26 million shares, worth more than $207 million, make it the second largest hedge fund investor, only surpassed by John Paulson’s Paulson & Co. This fund owns 5.6 million shares of Mallinckrodt, which account for almost 2% of its equity portfolio.
Third in this list is Constellium NV (NYSE:CSTM) a $3.15 billion market cap manufacturer of aluminum products and solutions primarily for aerospace, automotive and packaging markets. Over the first quarter of 2014, Mr. Rosenstein’s fund started a position with 5.3 million shares, valued at $155 million by the time the holding was reported. Ken Griffin’s Citadel Investment Group also holds a big chunk of this company’s stock. The fund owns 1.989 million shares, worth about $58 million.
Golar LNG Limited (USA) (NASDAQ:GLNG) is a $3.8 billion market cap midstream LNG company mainly engaged in the transportation, regasification and liquefaction and trading of LNG. Jana Partners raised its stake in the company by 44% over Q1 and now owns roughly 3.22 million shares, worth about $134 million. Once again, this makes it the largest hedge fund shareholder at the company, followed by Michael Thompson’s Bhr Capital, which increased its exposure by 22%, to 2.2 million shares.
Coming in fifth is Knowles Corp (NYSE:KN), a manufacturer of advanced micro-acoustic, specialty components, and human interface solutions and offers products such as hearing aid components, micro-electro-mechanical systems, microphones and transducers, among others, with a market cap of $2.5 billion. This is another newcomer at Mr. Rosenstein’s equity portfolio. His 2.15 million shares are worth $67 million. David E. Shaw also bought into this company over Q1, and now owns about 1.32 million shares.
Finally, there’s Newfield Exploration Co. (NYSE:NFX), a $5 billion market cap energy company in which Jana Partners initiated a position during the first quarter of 2014. The fund owns 1.779 million shares, worth about $55 million. However, this stake is quite small compared to Dmitry Balyasny’s 5.4 million shares, and Israel Englander’s 3.74 million shares.
Disclosure: Javier Hasse holds no position in any stocks mentioned