Clifton Robbins is a highly respected activist investor and the founder and CEO of Blue Harbour Group. I review his investing style and current stock holdings in the detailed portfolio review below.
Collaborating with Management Teams
While Blue Harbour is an activist investor, the company stresses that it only works collaboratively with management. In fact, the firm prides itself on the fact that it has never engaged in a proxy war or waged a media campaign against a company.
Before founding Blue Harbour, much of Clifton’s career was in private equity which appears to come through in his approach to investing. He likes to think like an owner, and ask the question: “if we owned the whole company what would we do differently?”
Robbins has a specific niche that he operates in. He looks for companies worth less than $10 billion where he believes the management team is strong but may not be aware of all the ways they can unlock value. He is only interested in working with leaders who are receptive to his ideas. Robbins has also stated he is not interested in fixing broken companies.
His focus therefore is on unlocking value in quality, well managed companies that he thinks are being undervalued by the market. Blue Harbour encourages companies to improve shareholder value by enhancing capital allocation strategies, executing strategic initiatives, and aligning management and shareholder interests.
In 2015, Blue harbour bought 9.9 percent of Babcock and Wilcox ahead of a proposed spinoff of its power generation business. While the power generation business that was spun off has performed poorly, the core business, that later became BWX Technologies (NYSE: BWXT), has seen its share price rally from $20 in 2015, to over $65 as of April 5th.
Also in 2015, Blue Harbour invested in Investors Bancorp (Nasdaq: ISBC), which Robbins said was, “one of the best risk/return investments I've seen.” He recommended that the company use its $2 billion cash reserve to buy back shares and increase dividends. While the company went along with these recommendations, they have not yet translated into an improved share price although shareholders have benefited from a higher dividend yield.
Blue Harbour has owned shares in semiconductor maker, Xilinix (Nasdaq: XLNX) since 2016. When asked about the position, Robbins stated that he liked the strong balance sheet and growth potential. He also noted that as one of the last independent chip makers around, Xilinix may be a takeover target. Since 2016 the stock is up 45%.
In March 2017, Blue Harbour disclosed a large stake in WebMD. By June the firm had helped to orchestrate a buyout of the entire company by Kohlberg Kravis Roberts. This deal netted Blue Harbour over 30% in as little as six months.
With such a great track record, I decided to take a deeper look into his current equity holdings below.
Blue Harbour's Latest Form 13F Filing
On February 14th, Clifton Robbins' firm Blue Harbour filed its quarterly Form 13F regulatory filing. I reviewed the filing to gain a glimpse into the firm's large portfolio.
Blue Harbour's stock portfolio totals $2.8 billion according to the latest filing. The list value of stock holdings is up 1.5% when compared to the last quarter. As a benchmark, the S&P 500 was up 6.1% over the same period.
Quarter-over-Quarter Turnover (QoQ Turnover) measures the level of trading activity in a portfolio. Blue Harbour's QoQ Turnover for the latest quarter was 32.7%, so the firm appears to trade a significant percent of its portfolio each quarter.
The Ideas section of finbox.io tracks top investors and trending investment themes. You can get the latest data on the holdings discussed below at the Blue Harbour page. The following table summarizes the firm's largest holdings reported in the last filing:
|Ticker||Name||Holding ($mil)||% Of Portfolio|
|ISBC||INVESTORS BANCORP INC NEW||$410.6||14.6%|
|OTEX||OPEN TEXT CORP||$332.9||11.8%|
|COMM||COMMSCOPE HLDG CO INC||$200.7||7.1%|
The seven positions above represent 75.1% of the fund's total portfolio. Adient plc (NYSE: ADNT) is its largest holding with a long position in the company worth $515.5 million.
Investors Bancorp, Inc. (Nasdaq: ISBC) is Clifton Robbins' second largest position and represents 14.6% of his firm's total portfolio.
Open Text Corporation (Nasdaq: OTEX) is Blue Harbour's third largest position and represents 11.8% of his firm's total portfolio.
Blue Harbour's 7 Largest Purchases
I also used finbox.io to find Blue Harbour's largest buys last quarter. Here's the list of the biggest stock purchases determined by comparing the last two filings:
|Ticker||Name||Purchased ($mil)||% Of Portfolio|
|RDC||ROWAN COMPANIES PLC||$268.6||4.9%|
|ZAYO||ZAYO GROUP HLDGS INC||$62.8||2.2%|
|MIC||MACQUARIE INFRASTRUCTURE COR||$59.3||2.1%|
|ON||ON SEMICONDUCTOR CORP||$53.8||1.9%|
The largest stock purchase for the quarter was Rowan Companies plc (NYSE: RDC). Blue Harbour increased its position in the company by $268.6 million and the stock now represents 4.9% of the firm's portfolio.
The next largest stock purchase was Adient plc (NYSE: ADNT). The investment manager increased its position in the company by $197.5 million with the stock now representing 18.3% of the firm's portfolio.
Blue Harbour's 7 Biggest Sells
Here's the list of biggest position reductions determined by comparing the last two filings:
|Ticker||Name||Sold ($mil)||% Of Portfolio|
|FFIV||F5 NETWORKS INC||$178.4||6.4%|
|CLNS||COLONY NORTHSTAR INC||$54.9||1.0%|
|MDRX||ALLSCRIPTS HEALTHCARE SOLUTN||$50.6||0.2%|
|DNB||DUN & BRADSTREET CORP DEL NE||$46.7||1.7%|
|SPY||SPDR S&P 500 ETF TR||$29.4||2.9%|
The largest stock sale for the quarter was F5 Networks, Inc. (Nasdaq: FFIV). Blue Harbour exited its $178.4 million position in the company.
The next largest stock sale was AGCO Corporation (NYSE: AGCO). Blue Harbour reduced its position in the company by $113.9 million.
Blue Harbour's Most Undervalued Holdings
To determine which stocks are trading below their intrinsic value, aka "fair value" I used the finbox.io Fair Value estimates. I also wanted to blend in some indication of which stocks might be ready to make a move up soon because they're popular with Wall Street analysts.
I calculated an average using the finbox.io fair value upside and analyst upside to create a blended upside which I then used to rank the most undervalued holdings.
Here are the top 7 stocks based on my calculations:
|Ticker||Name||Upside (finbox.io)||Upside (Analyst Target)||Blend Upside|
|THS||TREEHOUSE FOODS INC||35.5%||9.9%||22.7%|
|WCC||WESCO INTL INC||32.8%||12.5%||22.7%|
|OTEX||OPEN TEXT CORP||16.7%||25.5%||21.1%|
|ON||ON SEMICONDUCTOR CORP||23.3%||6.7%||15.0%|
|MIC||MACQUARIE INFRASTRUCTURE COR||-9.5%||30.3%||10.4%|
Treehouse Foods, Inc. (NYSE: THS) is tied for first place as the most undervalued stock in the fund. The company has a blended upside of 22.7% relative to its current trading price. Value investors may want to take a deeper dive into the valuation of the company.
WESCO International, Inc. (NYSE: WCC) also has a blended upside of 22.7% which is very intriguing. Investors may want to take a closer look at the stocks above.
Robbins' Impressive Track Record
Clifton Robbins began his career working in the mergers and acquisitions department at Morgan Stanley after graduating from Harvard College. Robbins also received an MBA from Stanford University.
From 1987 to 1999, Robbins worked at Kohlberg Kravis Roberts & Co. where he held the rank of General Partner. Robbins then went on to work at General Atlantic Partners from January 2000 to August 2004. Then Robbins founded Blue Harbour Group in late 2004. The company manages money on behalf of private and public institutions. Blue Harbour is an activist investment manager and also integrates ESG (environmental, social and governance) issues in its process. Robbins' clearly has an impressive track record which is why it's worth tracking his fund's holdings.
It is important to note that these filings are due 45 days after the quarter end date. Therefore, Blue Harbour's holdings above represent positions held as of December 31st and not necessarily reflective of the fund's current stock holdings.
However, most can agree that with thousands of stocks traded on U.S. exchanges, doing thorough research on each one is nearly impossible for smaller investors. Leveraging the resources of the largest hedge funds on Wall Street can be a powerful way to narrow down the list.
Author: Matt Hogan
Expertise: Valuation, financial statement analysis
Matt Hogan is a co-founder of finbox.io. His expertise is in investment decision making. Prior to finbox.io, Matt worked for an investment banking group providing fairness opinions in connection to stock acquisitions. He spent much of his time building valuation models to help clients determine an asset’s fair value. He believes that these same valuation models should be used by all investors before buying or selling a stock.
His work is frequently published at InvestorPlace, Benzinga, ValueWalk, AAII, Barron's, Seeking Alpha and investing.com.
Matt can be reached at [email protected].
As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.