ValueAct Discloses Massive Stake In Dresser-Rand


ValueAct Capital revealed in its latest 13D filing that it enhanced stake in Dresser-Rand Group Inc. (NYSE:DRC) to 6.6% of the company’s common stock.

ValueAct’s filing, however, didn’t outline any specific plans and the filing contains only the standard boiler plate.

Massive increase in stake

ValueAct Capital’s recent 13D filing with the SEC highlights massive increase as the hedge fund only owned around 650,000 shares at the end of 2013. The 13D filing was required due to activity on February 18th, but they have been buying throughout January and February at prices ranging from $53 to $57.05.

ValueAct now owns around 5 million shares in Dresser-Rand Group Inc. (NYSE:DRC).

Funds’ keen interest in Dresser-Rand

Interestingly several funds have shown keen interest in Dresser-Rand Group, which is a producer of engineered rotating equipment for a variety of industries worldwide.

Recently, David Cohen and Harold Levy, the managers of Iridian Asset Management have upped their stake in Dresser-Rand Group Inc. (NYSE:DRC) from 4.6 million to 5.6 million shares. Phil Gross and Robert Atchinson have also enhanced the stake by over 200% during the last quarter of 2013.

Moreover, Adage Capital too now holds 1.5 million shares reportedly worth $90.5 million. Jason Capello’s Merchants’ Gate Capital too has upped its investment in DRC to 925,000 shares worth $55.1 million.

As reported earlier, Atlantic Investment too evinced interest in DRC. Last year, it purchased 257,516 shares for $15.44 million, representing 1.44 percent of its portfolio.

In our analysis of “10 Super-Fast Growth Stocks”, we highlighted Dresser-Rand Group Inc. (NYSE:DRC) since its going public in 2001, the typical overvaluation as an IPO resulted in its long-term performance being lower than the company’s operating earnings growth.  However, we also observed that in spite of the headwinds of overvaluation, that this company’s long-term performance was significantly above-average since it went public.

As to the future for Dresser-Rand, we highlighted 16 analysts reporting to Standard & Poor’s Capital IQ expects growth to continue at over 30% per annum for the next five years.  As a cautionary note, we  cross-checked with Zack’s to highlight 9 analysts forecasting Dresser-Rand’s five-year earnings growth rate at 18%.  It’s kind of interesting that approximately half the number of analysts expect half the earnings growth rate. However, we highlighted even the 18% growth rate would make Dresser-Rand an attractive long-term investment if it were to come to pass.

Dresser-Rand Group Inc. (NYSE:DRC) jumped 5.2% after ValueAct’s disclosure of its 6.6% active stake.

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About the Author

Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports

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