TierneyMJ/Shutterstock

Hedge fund Starboard Value revealed it has a stake in automobile auction house KAR Auction Services (KAR - Get Report) , sending the stock rising more than 3% in trading Tuesday. 

Starboard didn't disclose the size of its stake in the Carmel, Indiana-based company, but Starboard CEO Jeffrey Smith did explain his firm's thinking behind the investment. 

KAR's value lies in its planned spinoff of the Insurance Auto Auctions business as the market has yet to price in the benefits, Smith told the audience at the 13D Monitor's 2019 Active-Passive Investor Summit in New York, according to CNBC. 

KAR announced last year that it will be separating into two public companies, with IAA becoming its own separate company. 

Starboard has investments in a wide array of companies including Marvell Technology (MRVL - Get Report) , Advance Auto Parts (AAP - Get Report) and Symantec (SYMC - Get Report) .