The activist investor, Barry Rosenstein scored an average return in the first quarter. According to the quarterly investor letter reviewed by ValueWalk, JANA Partners managed a 1.7% return in the master fund. The letter also noted that JANA Nirvana funds will be closed to new capital after May 1, 2014. JANA will be joined by a former Soros Fund alum, Joseph Fleury. He will be taking the position of managing director of JANA Partners.
In a separate news today, JANA Investment Advisers hired Causeway Capital Management to manage $358 million, making JANA Causeway’s sixth institutional client in Australia.
JANA buys AerCap, says stock is going to rise
While speaking of new positions, the fund mentioned that it initiated stakes in Aercap Holdings N.V. (NYSE:AER), a global aviation company. AerCap’s stock rose 3.5% as news of JANA’s new stake broke on Bloomberg. Shedding some light on its investment thesis, the letter said that AerCap is going to be the largest pure play aircraft lease business across the globe. After AerCap closes the acquisition of International Lease Finance Corporation from American International Group (NYSE:AIG), its fleet value per share will rise significantly and the stock will be worth a substantial premium to its current price of $40. One of the upsides that JANA sees in AerCap is the large stake that CEO Aengus Kelly will hold in the company after the ILFC transaction, therefore the interests of the management and shareholders are aligned in this way.
Walgreen is unappreciated, has massive value to be unlocked
The fund also took up a new position in Walgreen Company (NYSE:WAG), the drugstore chain. The letter talks about the bold steps that Walgreen has taken to win back its footing in the industry. JANA believes that the market is not fully appreciating the importance of WAG’s recent deals and their influence on earnings growth. Walgreen purchased Alliance Boots, Europe’s leading drug wholesaler and later invested in AmerisourceBergen Corp. (NYSE:ABC) which deals in pharmaceutical services in both U.S and Canada. WAG also has a joint purchasing agreement with Alliance Boots and AmerisourceBergen, which gives it more freedom to operate across the globe. The letter says that these factors should price Walgreen higher as it makes the company a key player in both European and American markets.
JANA’s success in activism at Safeway, Juniper
Rosenstein talked about the favorable developments in its activist positions in the letter. Some of the highlights were Cerberus Group’s acquisition of Safeway, which brought JANA’s investment in the company to a successful end. JANA’s involvement in Juniper Networks, Inc. (NYSE:JNPR) has also been fruitful. The fund was particularly profitable in March, as Juniper’s stock rose. The company provides networking solutions and has recently laid out a plan that benefits shareholders. Paul Singer’s Elliott Management also holds an activist position in Juniper.
JANA states in its letter regarding Juniper:
Juniper Networks Inc. (JNPR) delivered a solid fourth quarter earnings report and management used the conference call to lay out a new way forward for shareholders that includes refocusing the product line-up, cutting costs and returning capital to shareholders. We are pleased with the direction Shaygan Kheradpir is taking the company; under his stewardship we are confident that Juniper will benefit in 2014 from favorable cyclical tailwinds and the results of his restructuring.
In terms of URS, the letter noted:
The JANA SWAT team often says that activism can be a sword or a shield. When URS Corp. (URS) got off track with a disappointing earnings report in February, we altered our position from passive to active, filed a 13D and in a couple of weeks worked out an agreement with CEO Martin Koffel that will focus management and the board on unlocking value for URS shareholders. Four new directors recommended by JANA were added to the board, and a new committee of the board has been formed specifically to evaluate options for enhancing shareholder value, including reviewing strategic alternatives, operations, capital structure and management compensation.
In terms of QEP JANA states:
QEP Resources Inc. (QEP) announced that Bill Thacker has joined the board pursuant to an agreement with JANA in order to assist in the pending transaction to separate the QEP Field Services business from the E&P operations. We have tremendous confidence in and affection for Bill. He has a distinguished career as an executive and a board member in the MLP space and he has been associated with spectacular successes in both roles – as CEO of TEPPCO when it was sold to Enterprise Products (EPD) and as Chairman of Copano (CPNO) at the time of its sale to Kinder Morgan Energy Partners (KMP). We have known Bill for years and have benefited from his wisdom and insights in several of our midstream investments. We think he will be a terrific addition to the QEP board.
The letter mentioned that the hedge fund harvested some of its positions on the long and short side in Q1, and ended the period with 99% long exposure and 33% short exposure. The biggest alpha contributor was JANA activist longs, driven by the sharp appreciation of Juniper Networks (JNPR),