Long-Term Investment Ideas from Value Investor Jeffrey Ubben
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Jeffrey Ubben founded ValueAct Capital and, since 2000, has served as its CEO and CIO. Prior to founding and managing his own fund, Ubben was a managing partner at Richard Blum’s Blum Capital Partners for five years. ValueAct tends to focus its efforts on effecting change at a small number of companies, so its portfolio remains relatively focused and stable. The fund usually makes only three to four new investments in a year. The fund tends to hold 15 positions, maintaining each position for an average of about three years. This is a common strategy for activist investing funds, which leverage their influence and wait for results.
Below is a review of Ubben's top holdings as of his 13F filing, which indicates ValueAct's portfolio through June 30. Each of the stocks mentioned occupies at least 9 percent of ValueAct's total portfolio.
ValueAct has the largest institutional position in Motorola Solutions (NYSE: MSI) of any hedge fund with a stake around $1.4 billion. Motorola Solutions Inc was spun off from Motorola in 2011. Motorola Solutions houses much of the government and public safety applications of the former conglomerate, in addition to enterprise, RFID handheld, mobile computing, data capture, and iDEN business. The company is trading at 13.9 times 2012 estimated earnings, which is competitively valued in respect to the broader technology sector. Consensus earnings for 2012 are $2.97, which is an increase from $2.20 in 2011; revenue has also increased year-over-year in both quarters one and two. Billionaires George Soros and Leon Cooperman are among MSI investors (see George Soros’ stock picks).
Adobe Systems (NASDAQ: ADBE) is the maker of the famous Creative Suite 6, which is used by a wide variety of design professionals. This year, the company released the Creative Cloud suite. The consensus earnings estimate this year for the company is $1.85 a share, and the company has grown income each of the past 4 years and is known for its straight-forward earnings guidance and strong financials. Adobe's products have much the same market position as Microsoft's (NASDAQ: MSFT), and upgrades to the new version of the Creative Suite software are expected to generate a 7 percent increase in sales this year.
Valeant Pharmaceuticals (NYSE: VRX) agreed to acquire Medicis Pharmaceutical Corp (MRX) for $44 cash per share. The agreement will broadly increase Valeant's revenue stream; Medicis raked in $721 million in revenue in 2011 and produces a large number of dermatological and aesthetic products that will augment Valeant's present offerings. About 34 percent of the company's sales come from the neurological drug segment, including Wellbutrin XL, an antidepressant medication accounting for 9 percent of the company's sales. The company purchased marketing rights to the drug from GlaxoSmithKline plc (GSK) in 2009.
C.R. Bard (NYSE: BCR) designs, produces, and distributes a number of medical devices used in hospitals, doctors' offices, extended care facilities, and other off-site medical offices. The company's margins and earnings per share this year have sagged slightly after its acquisition of Lutonix, which is nevertheless expected to strengthen the company's long-term position. Shares are trading at 15 times 2012 expected earnings and about 14 times 2013 expected earnings, suggesting that it is trading a near fair value. However, in June, the company announced about $500 million in share repurchases and has a history of returning value to its investors.
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This article is written by Brian Tracz and edited by Meena Krishnamsetty. They both have long positions in Microsoft.The Motley Fool owns shares of Microsoft. Motley Fool newsletter services recommend Adobe Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.