Barry Rosenstein, the activist investor and founder of Jana Partners, saw lackluster performances in the past years, forcing Barry Rosenstein to liquidate two stock hedge funds in 2019. Barry Rosenstein's investment firm held $11 billion of assets at its 2015 peak. Rosenstein has now shifted the focus exclusively on activist investing and he is currently managing just over $1.1 billion of a stock portfolio.
“We will transform into a firm solely dedicated to our core competency of shareholder engagement,” Rosenstein and his team said in an investor letter.
“This is where we have delivered our best returns for investors, developed a real competitive advantage, made our mark on numerous industries, and where we see our future and the richest opportunity set,” the letter said.
Barry Rosenstein - Jana Partners
The New York-based hedge fund’s stock-picking strategies include buying stocks at a discount and unlocking value for shareholders by making big changes in business models. Jana Partners Barry Rosenstein is an activist investor and he likes to hold board positions. He is also famous for pushing Whole Foods to accept the acquisition offer from the world’s largest e-commerce giant Amazon (NASDAQ:AMZN). He probably would have been a lot richer if he had taken the cash from Amazon for his Whole Foods stake and purchased Amazon shares with that windfall. At the time Amazon shares were trading below $1000.
He was a key player in breaking Graw-Hill into two and also persuaded energy company El Paso to break the business into two separate companies. Jana Partners have also advised Qualcomm (NASDAQ: QCOM) to cut costs.
Barry Rosenstein's investment firm likes to hold positions in companies for the long-term instead of making short bets. Its average time held in the top ten positions stands around 6.50 quarters.
Jana Strategic Investment fund generated an impressive 52% gain in 2019. Last year's gains helped Jana to rank as the best activist investor because shareholders believe Jana’s push for making operational or other changes helped companies to generate big returns for investors.
The firm seeks to buy stocks when trading at a steep discount and then works with the management to generate value for shareholders.
The latest 13F filing shows that the New York-based hedge fund has made big changes in its portfolio. Barry Rosenstein investment firm bought 3 new stocks and added to two existing positions. The fund also sold out two positions and reduced its stake in three stocks.
While Barry Rosenstein’s reputation remains intact, the same can’t be said of the hedge fund industry as a whole, as its reputation has been tarnished in the last decade during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 78 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Let’s now begin our countdown on Barry Rosenstein's top 10 stock picks.
The jewelry retailer Tiffany & Co (NYSE: TIF) is the tenth-largest stock holding of Jana Partners stock portfolio. The hedge fund currently holds a call position in Tiffany valued at $4.2 million, accounting for 0.38% of the overall portfolio.
The New York-based hedge fund first initiated a position in Tiffany in 2017.
Despite sluggish share price performance in 2020 due to pandemic, shares of jewelry retailer Tiffany & Co rallied almost 70% in the past five years. The company has also been rewarding investors with big dividends. It has raised dividends every year in the past 18 years. Tiffany has generated $1.01 billion in the September quarter revenue while earnings per share came in at $1.11.
Mark Erceg, Tiffany Chief Financial Officer stated, “We believe that expanding operating margins by nearly 500 basis points in the third quarter as compared to the prior year and posting exceptionally strong net earnings growth against an extremely difficult macroeconomic backdrop demonstrates the strength and durability of the Tiffany brand.”
Rosenstein obviously bought the TIF call options to protect himself against a decline in price in case LVMH doesn't take over TIF at the premium it promised. LVMH initially offered $135 per share to TIF shareholders, however, after the pandemic broke out it renegotiated a lower price of $131.50. We believe there are better places than TIF to invest your money right now.
Barry Rosenstein's investment firm has initiated a big position in The Brink's Company (NYSE: BCO) during the third quarter. In the case of Brink's Company, the hedge fund has used its strategy of buying stocks at discount. Shares of the security company remained under pressure during the second and third quarter amid pandemic related challenges.
However, the stock price rebounded sharply in the past two months, thanks to the broader stock market rally on coronavirus vaccine hopes and US elections.
The company’s cost-cutting along with margin enhancement strategies helped in enhancing investors’ confidence. It has generated 5% year over year revenue growth in the latest quarter, with an expectation for exceeding the high end of full-year revenue guidance for $3.7 billion.
The software company New Relic, Inc (NYSE: NEWR) is among the newcomers to Barry Rosenstein's investment firm Jana Partners stock portfolio.
The hedge fund initiated a position in New Relic during the third quarter by purchasing 546,309 shares valued at $30.7 million. It is the eighth largest stock holding of Jana Partners portfolio, accounting for 2.72% of the overall portfolio.
New Relic shares fell sharply after trading above the $100 level last year. Barry Rosenstein saw the share price underperformance as a buying opportunity.
The software company has generated 13% year-over-year revenue growth in the September quarter while its loss per share came in at $0.07 compared to the consensus for a $0.01 gain.
Industrial distributor HD Supply Holdings, Inc. (NASDAQ: HDS) is one of the long-running stock holdings of Jana Partners.
Despite selling 16% of shares in the third quarter, industrial distributors accounted for 4.16% of the overall portfolio. Shares of HD Supply Holdings rallied 40% this year, extending the five years gains to 85%. Home Depot (NYSE: HD) recently stroke a deal to acquire HD Supply Holdings for $56 per share in cash.
Jana Partners sold almost half of its stake in Callaway Golf Company (NYSE: ELY) in the latest quarter. Despite that, Golf Company is the sixth-largest stock holding of Barry Rosenstein's stock portfolio, accounting for 4.98% of the overall portfolio. The hedge fund first initiated a stake in Callaway Golf Company in 2019.
Shares of Golf Company soared 14% this year, accelerating the five-year gains to 146%. Its share price gains are backed by robust financial growth.
The company has generated 11% year over year revenue growth in the latest quarter while earnings per share of $0.54 grew 69% from the year-ago period. Moreover, the company expects the extension of the revenue growth trend in the quarters ahead despite pandemic related challenges.
Golf Company CEO said, "Although we expect some level of continued volatility due to the ongoing pandemic, Q3's trends have thus far continued into Q4 and, perhaps more importantly, we also now appreciate even more that all of our businesses are likely to be favored in both the realities of the current world and likely consumer trends post-pandemic. All of our business segments, as well as the Topgolf business, support an outdoor, active, and healthy way of life that is compatible with a world of social distancing. These are key factors that will likely be important for consumers over the next several months and will also likely continue post-pandemic."
