This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Activist Shorts Austerity, Goes Long M&A

NEW YORK ( TheStreet) -- Presenting his investing strategy between funds that scored on recent divestitures by Barnes & Noble (BKS) and AOL (AOL) and Carl Icahn at a conference of top activists this week, Jeffrey Ubben, a lanky and tan San Francisco-based hedge fund manager, seemed out of place.

Ubben, who heads ValueAct Capital, a fund with nearly $7.5 billion invested in stocks including big positions in Motorola Solutions (MSI), Adobe (ADBE - Get Report) and Valeant Pharmaceuticals (VRX - Get Report), has the contrarian nature to put his money behind corporate turnarounds. That's nothing revelatory among activists, however, amid C-suite caution, the pruning of industry giants like Pfizer (PFE), Kraft (KFT) and ConocoPhillips (COP) and an investor focus on quickly unlocking post-crisis share value, it's Ubben's calls for spending, M&A and investment in top line growth that distances his strategy from activist peers.
ValueAct Capital's head makes the case for M&A and earnings growth

"We're always fighting the last war in this age of austerity. The problem is that like people don't trust the government, they don't trust their companies," Ubben told TheStreet after making an investing presentation on Adobe and speaking on an activism panel at the IMN Active-Passive Investor Summit on April 30.

Trust in corporate management is about the last thing that would be associated with the lions of shareholder activism, from Carl Icahn to T. Boone Pickens, but Ubben's investing record shows he is of a similar species. Since founding ValueAct in 2000, Ubben says that across 64 investments the fund has grabbed 32 board seats, pushed for 25 management changes and seen 20 sales.

Right now, it's Ubben's view of what his biggest investments should do to position themselves for share gains that makes him a contrarian beyond traditional activists, as markets continue to push new highs from a March 2009 bottom in the S&P 500 Index.

Where an activist may zero in on cutting costs for earnings per share growth, Ubben is investing in a digital content transformation at Adobe that has it poised for durable top line growth. Meanwhile, he sees acquisitions as a key opportunity for Valeant Pharmaceuticals, which after a string of cost cuts, is a post-crisis M&A aggressor.

About companies where Ubben says ValueAct has board seats or management's ear, "we force them to take risk, especially in a downturn."

An April poll of corporate executives by Ernst & Young showed interest in mergers falling significantly in the first quarter, with just 31% of C-suites interested in cutting large deals, the smallest deals appetite since early 2009 and down from over 50% in previous quarters. Sharply falling M&A volumes and advisory-based earnings reflect that caution. Yet at the same time, CEOs are sitting on piles of cash and pouring it into share buybacks and dividends.
1 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
ADBE $81.75 -0.29%
CBG $37.70 -0.71%
VRX $257.81 0.11%
AAPL $120.10 -0.99%
GOOG $631.99 1.00%

Markets

Chart of I:DJI
DOW 17,611.95 -77.91 -0.44%
S&P 500 2,102.21 -1.63 -0.08%
NASDAQ 5,133.1080 +4.8270 0.09%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs