13F Watch: Shareholder Activism Pays

When compared to the $2.5 trillion hedge fund industry at large, activist investors have garnered a disproportionate share of the headlines this year, and for good reason: they’ve been exceptionally busy — launching 148 activist campaigns in the first half of 2014 alone — and they continue to outperform their hedge fund peers, more than doubling the 3.1% return posted by all hedge funds through the second quarter.

The rising profile of activists has coincided with the celebrification of investing, and many prominent fund managers, like Carl Icahn and Bill Ackman (pictured above), have proven themselves adept at using various media outlets to their advantage. The outspoken Icahn has a strong following on Twitter, and Ackman’s crusade against Herbalife (HLF) has been relentless and well-chronicled. While Ackman insists there is a moral element to his campaign against Herbalife, most activists target companies that they believe are underperforming or otherwise failing to maximize shareholder value. The attention of activists is generally unwelcome by CEOs but often serves as a catalyst for change and a higher stock price for the company in the crosshairs. For this reason alone, tracking the portfolio moves of activist investors can be a worthwhile endeavor.

While 13F filings are dated and don’t necessarily present a full picture of a manager’s holdings — they don’t include short positions — below we summarize the notable changes made during the second quarter of 2014 by some widely followed activists and other prominent portfolio managers:

• Bill Ackman (Pershing Square Capital): Ackman increased his stake in Allergan (AGN); sold positions in Beam (BEAM), Apartment Investment and Management (AIV), and Home Properties (HME); and reduced his holdings in Canadian Pacific Railway (CP). At the end of the quarter, Ackman’s top holdings were Allergan (AGN), Air Products & Chemicals (APD), Canadian Pacific Railway (CP), Burger King Worldwide (BKW), and Platform Specialty Products (PAH).
• Bruce Berkowitz (Fairholme Funds): Berkowitz reported new stakes in Lands’ End (LE), Reynolds American (RAI), Altria Group (MO), Transocean (RIG), Mercury General (MCY), KKR (KKR), Diamond Offshore Drilling (DO), and Oaktree Capital (OAK), and sold his position in Chesapeake Energy (CHK). At the end of the quarter, American International Group (AIG), Bank of America (BAC), Sears Holdings (SHLD), St Joe (JOE), and Leucadia National (LUK) remained Fairholme’s top holdings.
• Warren Buffett (Berkshire Hathaway): Berkshire disclosed new positions in Charter Communications (CHTR) and NOW (DNOW), and sold its stake in Starz (STRZA). Top holdings at the end of the quarter remained Wells Fargo (WFC), Coca-Cola (KO), American Express (AXP), International Business Machines (IBM), and Wal-Mart Stores (WMT).
• David Einhorn (Greenlight Capital): Einhorn added positions in Civeo (CVEO), AerCap Holdings (AER), Time (TIME), Chemtura (CHMT), NorthStar Realty Finance (NRF), and DSW (DSW), and sold stakes in Rite Aid (RAD), Nokia (NOK), Penn National Gaming (PENN), Aspen Insurance Holdings (AHL), Hatteras Financial (HTS), and Blackhawk Network Holdings (HAWK). Top holdings at the end of the quarter included Micron Technology (MU), Apple (AAPL), Marvell Technology Group (MRVL), Sunedison (SUNE), and Cigna (CI).
• Jeremy Grantham (GMO): GMO’s largest new positions included Google (GOOG), Safeway (SWY), DIRECTV (DTV), Hillshire Brands (HSH), Ally Financial (ALLY), and LIN Media (LIN). Notable sells from the portfolio included positions in New Oriental Education & Technology Group (EDU), Omnicom Group (OMC), Ambev (ABEV), American Realty Capital Properties (ARCP), and Avianca Holdings (AVH). At the end of the quarter, GMO’s top holdings included Microsoft (MSFT), Oracle (ORCL), Philip Morris International (PM), Johnson & Johnson (JNJ), and Chevron (CVX).
• Carl Icahn (Icahn Associates): Icahn established a new position in Gannett (GCI), added to his stakes in Navistar International (NAV), and eBay (EBAY), and reduced his position in Netflix (NFLX). At the end of the quarter, top holdings included Apple (AAPL), CVR Energy (CVI), Federal-Mogul (FDML), Chesapeake Energy (CHK), and eBAY (EBAY).
• Seth Klarman (Baupost Group): Klarman added new positions in eBAY (EBAY), Theravance Biopharma (TBPH), SunEdison Semiconductor (SEMI), Kosmos Energy (KOS), and Boyd Gaming (BYD), and sold his stake in BP (BP). Top holdings at the end of the quarter included Micron Technology (MU), Idenix Pharmaceuticals (IDIX), Via Sat (VSAT), Theravance (THRX), and Cheniere Energy (LNG).
• Dan Loeb (Third Point): Loeb’s largest new positions established during the quarter included Ally Financial (ALLY), Rackspace Hosting (RAX), IAC/InterActiveCorp (IACI), FMC (FMC), Finisar (FNSR), Amgen (AMGN), and Walgreen (WAG). Notable sells from the portfolio were Verizon Communications (VZ), Cabot Oil & Gas (COG), International Paper (IP), Crown Holdings (CCK), Google (GOOG), Citigroup (C), and Signet Jewelers (SIG). At the end of the quarter, top holdings included Dow Chemical (DOW), Ally Financial (ALLY), Actavis (ACT), American International Group (AIG), and Sothebys (BID).
• Howard Marks (Oaktree Capital): Marks’s largest new positions included Ally Financial (ALLY), JD.com (JD), BRF (BRFS), Blackstone Group (BX), OI (OIBR), and Transportadora de Gas del Sur (TGS). Notable deletions from the portfolio included Level 3 Communications (LVLT), Cia Brasileira de Distribuicao (CBD), Charter Communications (CHTR), E*TRADE Financial (ETFC), Houghton Mifflin Harcourt (HMHC), and Capital Product Partners (CPLP). Top holdings at the end of the quarter included EXCO Resources (XCO), Dynegy (DYN), First BanCorp/Puerto Rico (FBP),Masonite International (DOOR), and Ally Financial (ALLY).
• Nelson Peltz (Trian Partners): Peltz sold his stake in GNC Holdings (GNC). Top holdings at the end of the quarter included Mondelez (MDLZ), PepsiCO (PEP), Ingersoll-Rand (IR), Bank of New York Mellon (BK), and Legg Mason (LM).
• Barry Rosenstein (Jana Partners): Rosenstein’s largest new positions established during the first quarter included Apache (APA), FMC (FMC), Civeo (CVEO), PetSmart (PETM), Charter Communications (CHTR), CBS (CBS), and Equity Commonwealth (EQC). Notable sells from the portfolio included Sirius XM Holdings (SIRI), Juniper Networks (JNPR), Golar LNG (GLNG), Outerwall (OUTR), Teva Pharmaceutical Industries (TEVA), Knowles (KN), Newfield Exploration (NFX), and Applied Materials (AMAT). At the end of the quarter, top holdings included Walgreen (WAG), Equinix (EQIX), Ashland (ASH), American International Group (AIG), and Actavis (ACT).
• David Tepper (Appaloosa Management): Tepper established new positions in Google (GOOG), Mohawk Industries (MHK), Weatherford International (WFT), and Ryland Group (RYL). Notable sells during the quarter included QUALCOMM (QCOM), JPMorgan Chase (JPM), MetLife (MET), Trinity Industries (TRN), Delphi Automotive (DLPH), and Hess (HES). At the end of the quarter, top holdings included American Airlines Group (AAL), General Motors (GM), Citigroup (C), Priceline Group (PCLN), and Google (GOOG).

Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.