ValueAct Capital Management, a well-known activist hedge fund, has discreetly acquired stakes in three major corporations: Disney (NYSE: DIS), Recruit Holdings (OTCMKTS: RCRRF), and Expedia Group(NASDAQ: EXPE). Renowned for its behind-the-scenes activism, ValueAct is positioning itself to unlock hidden potentials and influence positive changes in these industry giants.
Recruit Holdings: A Tokyo-based opportunity
ValueAct has also set its sights on Recruit Holdings (OTCMKTS: RCRRF), a Tokyo-based company with an approximately $49 billion market value. The hedge fund recognizes the undervalued assets within Recruit, mainly through its job-search site Indeed. Despite being based in Tokyo and listed on the OTC markets, ValueAct sees a considerable opportunity for growth.
According to ValueAct’s assessment, Recruit’s management team is actively working to improve its internet platforms’ monetization and profit margins. The hedge fund believes that Recruit’s assets are already worth double the company’s share price. Furthermore, it notes that Indeed, contributing 45% of Recruit’s earnings is based in Austin, Texas.
Expedia Group: Riding the growth trajectory
Expedia Group(NASDAQ: EXPE) is another key focus for ValueAct, with the hedge fund praising the company’s recent stock price surge of 25%. Expedia is valued at about $17 billion and has witnessed an acceleration in growth, with margins climbing to their highest levels in a decade.
ValueAct attributes this growth to smarter pricing, better cost management, and strategic website modernization. Unlike activist investors who often push for change publicly, ValueAct appreciates Expedia’s management for their efforts in rebuilding aspects of the business during challenging times.
Disney’s potential for growth
One of the key highlights of ValueAct’s recent strategic moves is its substantial investment in Disney (NYSE: DIS), a media and entertainment giant valued at $167 billion. While the exact size of ValueAct’s stake remains undisclosed, the hedge fund is optimistic about Disney’s potential for growth, suggesting that the stock price could double in the future.
Disney’s CEO, Bob Iger, has been steering the company through a turbulent period, emphasizing the importance of streaming, theme parks, cruises, studios, and the ESPN sports network as the four building blocks of the company’s future. ValueAct believes that Disney’s theme parks and consumer-products businesses alone are worth at least $80 a share.
The quiet activism approach
What sets ValueAct apart from traditional activist investors is its preference for a quieter approach, working closely with the management behind the scenes. While other firms might advocate publicly for change and seek board seats, ValueAct believes in fostering collaboration with company leaders to bring about positive transformations.
ValueAct’s past successes include influencing companies like Microsoft (NASDAQ: MSFT) and Salesforce (NYSE: CRM). By avoiding public confrontation, the hedge fund has successfully implemented changes that align with the long-term goals of the companies it invests in. The invitation of ValueAct CEO Mason Morfit onto Salesforce’s board earlier this year resulted in a notable surge of 64% in the company’s stock price.
Opportunities for collaboration
ValueAct’s diverse portfolio, spanning technology, finance, and media, presents opportunities for collaboration and cross-pollination of ideas among its portfolio companies. The hedge fund’s expertise, particularly in Japan and the technology sector, positions it as a catalyst for innovative solutions and strategies.
ValueAct’s experience working with technology giants like Microsoft and Salesforce showcases its ability to navigate complex landscapes and contribute valuable insights to the companies it invests in. This collaborative approach aims to leverage synergies and drive sustainable growth across its portfolio.
The investment philosophy
At the core of ValueAct’s investment philosophy is identifying undervalued companies and collaborative efforts to unlock their full potential. The hedge fund’s commitment to value is exemplified by its belief that Recruit Holdings is undervalued due to its listing in Tokyo and that its assets are worth double its current share price.
ValueAct’s optimism about Expedia Group’s growth prospects stems from its belief that the company is benefiting from smarter pricing, better cost management, and shrewd modernization of its websites. This investment philosophy aligns with ValueAct’s track record of successful engagements, where it actively works with management to enhance performance.
As ValueAct sets its sights on Disney, it enters the volatile media industry. With its vast content library spanning animation, Pixar, Star Wars, Marvel, and general entertainment, Disney faces challenges from the rise of streaming services and evolving consumer preferences. ValueAct and other activist investors are scrutinizing Disney’s stock price, which is believed to be undervalued. Activist investors, including ValueAct, have increased their stake, adding complexity to Disney’s current situation.
ValueAct Capital Management’s recent strategic moves reflect a calculated and comprehensive approach to investment. By unlocking untapped potential in companies across diverse industries, ValueAct is positioned to influence positive changes and foster growth, showcasing the power of a quiet, collaborative form of activism.