13Ds are filed with the Securities and Exchange Commission within 10 days of an entity’s attaining a greater than 5% position in any class of a company’s securities. Subsequent changes in holdings or intentions must be reported in amended filings. This material has been extracted from filings released by the SEC from Dec. 12 through Dec. 18, 2019. Source: InsiderScore.com
Resideo Technologies (REZI)
Praesidium Investment Management reported an increased position in the safety-controls and electronics manufacturer of 7,781,233 shares, equal to 6.3% of the tradable stock. The larger holding resulted from the purchase of 1,678,355 shares at prices of $9.91 to $11.04 each from Dec. 3 to Dec. 11. Praesidium cited that it has faith in Resideo’s products and solutions unit’s “strong competitive position in the pro-contractor channel,” and that the firm’s ADI Global Distribution is “dramatically underappreciated” given the current mergers-and-acquisitions environment and the division’s “leading position and demonstrated track record of strong execution.” Praesidium cited that the recent changes to Resideo’s board, including the search for a new CEO, represent a “decisive step forward’’ to operational improvement, and revealed that it will likely continue to engage Resideo “to drive growth, profitability and free cash flow, and total shareholder returns.”
Howard Hughes (HHC)
Pershing Square revealed a 14.8% stake in the real estate developer, equivalent to 6,384,239 shares. On Dec. 12, Howard Hughes’ board granted Pershing a waiver “under Section 203 of the Delaware Corporation Law to acquire up to 26%” of Howard Hughes’ outstanding stock. No plans or proposals have been discussed in conjunction with the waiver.
Tailored Brands (TLRD)
Scion Asset Management disclosed a 6.4% interest in the apparel retailer, equal to 3,100,000 shares, on Dec. 13. That figure includes the purchase of 25,000 shares on Oct. 17 at $4.44 each and another 150,000 on Dec. 12 at $4.38 apiece. Scion revealed that it has continued to engage Tailored Brands’ current management as well as its former executives regarding the retailer’s “operations, corporate governance, and control.” It is concerned about “the number of facilities,” including warehouses and office space, owned by Tailored Brands, and believes the firm should sell its various properties and then lease them back in order “to generate cash for more pressing capital allocation needs, such as share buybacks and debt reduction,” a strategy Scion has stressed since August.
Increases in Holdings
Ashland Global Holdings (ASH)
Eminence Capital disclosed an increased position in the specialty-chemicals maker of 5,636,522 shares. The higher stake resulted from the purchase of 555,000 shares on Dec. 9 and Dec. 12 at prices of $75.52 to $75.91 each, giving Eminence a 9.4% interest in Ashland’s tradable stock. On Dec. 9, Eminence filed a proxy statement for the 2020 annual shareholder meeting that included founder and CEO Ricky Sandler as a nominee to Ashland’s board of directors.
GTT Communications (GTT)
Spruce House Investments raised its position in the network- and communication-services firm to 15,886,167 shares. The holding includes 11,167 shares of restricted stock held by Spruce House co-founder Benjamin Stein, who is on GTT’s board. Spruce House, citing that it acquired additional shares for investment purposes, bought 800,000 shares from Dec. 5 through Dec. 13 at prices of $9.97 to $12.27 each. The investment followed the purchase of 1,130,000 shares disclosed earlier this month and gives Spruce House a 28% interest in GTT’s outstanding stock.
Potbelly (PBPB)
Ancora Advisors lifted its position in the casual sandwich-shop operator to 1,258,373 shares. Noting that Potbelly was “undervalued and represented an attractive investment opportunity,” Ancora first bought a modest 730 shares on Nov. 19 at $4.43 each and then followed with a 100,000-share purchase on Dec. 11 at $4.27 apiece. Following those additions, Ancora now holds roughly 5.3% of Potbelly’s outstanding stock.
Rocket Pharmaceuticals (RCKT)
RTW Investments disclosed a higher stake in the clinical-stage biopharmaceutical company of 17,282,324 shares. That figure accounts for 225,000 shares purchased through Rocket’s public offering on Dec. 13 at a price of $22.25 each and gives RTW a 31.9% interest in the firm.
Frequency Electronics (FEIM)
Edenbrook Capital disclosed an increased interest in the communications hardware-components manufacturer of 17.4%. Edenbrook bought 79,169 shares of the company at prices ranging from $9.30 to $11.28 per share from Oct. 28 through Dec. 17, and now owns 1,583,949 shares of Frequency’s common stock.
Decreases in Holdings
Tricida (TCDA)
OrbiMed Advisors reduced its exposure to the biotechnology firm to 9,617,912 shares, or 19.4% of the tradable stock. That amount accounts for the block trade sale of 1,500,000 shares on Dec. 11 at $40 apiece. OrbiMed noted that it has been a board affiliate of Tricida since January 2014 and “may have the ability to affect and influence control” of the biotech, though no plans or proposals have been revealed at this time.
Madrigal Pharmaceuticals (MDGL)
Bay City Capital cut its position in the clinical-stage biopharmaceutical outfit by slightly more than 20%, to 4,177,854 shares. Bay City sold 1,200,000 shares through a public offering on Dec. 10 at a price of $105.47 per share. Bay City gave no reason for the divestment and now holds an approximate interest in Madrigal of 27.1%.
Asure Software (ASUR)
Red Oak Partners, without citing a reason, slashed its holding of the cloud-based human-resources management stock to 335,385 shares. The lower position resulted from the block trade sale of 500,000 shares on Dec. 11 at a price of $8.20 each, leaving Red Oak with a 2.3% stake in Asure’s tradable stock.
The Activist Spotlight
Business: provides application-focused solutions
Stock Market Value: $26 billion ($83.64/share)
What’s Happening: Pershing Square has acquired a position for investment purposes.
Key Numbers:
6%: approximate annual growth rate since a new CEO was appointed in 2015
100 basis points: approximate annual profit-margin improvement under the same CEO
50 to 70 basis points: expected annual profit-margin improvement in coming years
23%: Agilent’s approximate profit margin, versus 31% for its closest peer,
Waters Corp.
Behind the Scenes: Agilent sells equipment that tests for impurities in products across different markets, such as pharmaceuticals and food industries. While classified as a health-care company, it’s more of an industrial company with only a third of revenue from pharmaceuticals. This is a high-quality growing business with great secular trends favoring increased regulation and quality control. The company also has a predictable revenue stream, with about 60% of revenue coming from service contracts and consumables required to prep and run the testing. At the end of 2014, Agilent spun off its electronic-measurement-products business, and four months later it hired a new CEO. Since then, there has been stable organic revenue growth and margin improvement, although margin improvements are expected to decrease in coming years. Pershing Square will probably encourage greater margin improvements, as Agilent significantly trails its Waters Corp. rival. There is also an opportunity to optimize the underlevered balance sheet.
–Kenneth Squire
The 13D Activist Fund, a mutual fund run by an affiliate of the author and not connected to Barron’s, has no position in Agilent Technologies. In addition, the author publishes and sells 13D research reports, whose buyers may include representatives of participants in, and targets of, shareholder activism.
Email: [email protected]
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