The Morning Brief: Morfit to Replace Ubben as ValueAct CIO

May 16, 2017   Stephen Taub

ValueAct founder Jeffrey Ubben will remain CEO but will transition his investment duties as part of a succession plan.

Jeffrey Ubben is dialing back his involvement in making key investment decisions at ValueAct Capital Management. He has named president Mason Morfit as chief investment officer, responsible for making final investment decisions, according to a Wall Street Journal report.

The move is part of a succession plan. Ubben, who will remain chief executive officer, is 54, while Morfit is 41. Ubben told the paper he did not want ValueAct, which was founded in 2000, to suffer the same fate that caused his father’s firm to collapse following the departure of its founders. "This is not something you can do at the end of your term," Ubben said. "This is something you have to do well in advance. When I’m sitting on a talent like Mason, I’m just not going to let him go, and Mason is going to want to evolve."

Ubben’s father, Timothy Ubben, co-founded Lincoln Capital Management, an investment management firm that once hit $50 billion in assets. ValueAct was an early investor in Valeant Pharmaceuticals International and played a major role in its growth plan, before the drug maker’s share price collapsed over the past year or so. Morfit has sat on the board of Valeant as well as Microsoft, a very successful ValueAct investment.

ValueAct gained 4 percent last year, surging more than 12 percent in the second half of the year. The firm, which manages about $16 billion, announced earlier this year it would return some capital to its investors.

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Starboard Value took a large new position in Fortinet, a major cyber-security company, in the first quarter. Starboard, the activist firm headed by Jeffrey Smith, disclosed it owned a $160 million position in the company, making the stock its sixth-largest holding, according to a new regulatory filing.

This is very intriguing. Certainly, there is heightened interest in cyber-security in general these days. However, as we have chronicled many times in the past, it is very unusual for Starboard or other major activists to telegraph future potential targets.

Of course, there is no reason to believe Fortinet will become an activist target of Starboard. The stock on Monday rose about 3.4 percent, to close at $40.45, and is now up about 28 percent for the year to date. It has also more than doubled from its November 2013 low. This will be an interesting one to watch.

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Philippe Laffont’s Coatue Management reported it owned nearly 21 million shares of Snap, the high-profile social media company that went public earlier in the quarter, making the stock the Tiger Cub’s seventh-largest U.S. long holding. Coatue was one of several hedge funds that made a sizable bet on the company when it was private. Altogether, Coatue boosted the value of its U.S. stock portfolio in the past quarter by about 25 percent, to $10.4 billion.

Glade Brook, the hedge fund firm that aggressively morphed into a venture capital firm late last year, said it owned nearly 4.7 million shares of Snap, its only reported U.S. stock holding. As we have reported several times, Glade Brook made several investments in Snap when it was private.

Shares of Snap surged about 8.4 percent, to close at $20.74.

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Leon Cooperman’s Omega Advisors aggressively traded its portfolio in the first quarter. But the changes did not meaningfully affect the composition of its U.S. stock holdings, according to its latest required regulatory filing. Omega established 31 new positions and liquidated 18. Altogether it held 84 different individual U.S. stocks. None of its new positions, however, rank among its top-ten holdings and just two are among its 25 largest positions.

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Tiger Global Management tinkered with each of its three largest U.S. long holdings, which collectively account for more than 40 percent of its portfolio. It trimmed No. 1-holding the Priceline Group by 15 percent and reduced its stake in No. 3-holding Amazon.com by 2 percent. It slightly added to its stake in JD.com.

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Luxor Capital Partners continues to rebound from its woes of last year, when it lost some high-profile investors. It rose 1.82 percent in April, boosting its gain for the year to 11.35 percent.

The event-driven firm, headed by Christian Leone, earned gains in April from food delivery phone app GrubHub, Spanish infrastructure giant Ferrovial — a new position — and Mindbody, which makes cloud-based business management software. Gains for the four months were driven by Mindbody, GrubHub, and three energy companies: Golar LNG, C&J Energy Services, and Basic Energy Services. Luxor, which manages $3 billion, was down 9 percent in 2014 and 18.3 percent in 2015 and lost another 5.2 percent in January 2016 before rebounding sharply and finishing the year up 12.2 percent.


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