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Jana Partners' Top 5 Trades in the 1st Quarter

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- By James Li

Jana Partners (Trades, Portfolio), a New York-based investment firm, disclosed this week that its top five trades during the first quarter included the reduction in its holdings in Perspecta Inc. (NYSE:PRSP) and Encompass Health Corp. (NYSE:EHC), the closure of its position in Bloomin Brands Inc. (NASDAQ:BLMN) and boosts to its stakes in Treehouse Foods Inc. (NYSE:THS) and Laboratory Corp of America Holdings (NYSE:LH).


Founded in 2001 by Barry Rosenstein, Jana takes both long and short positions in debt and equity securities. The firm applies a fundamental value discipline to identify undervalued companies in which event-driven catalysts can unlock shareholder value.

Jana Partners' Top 5 Trades in the 1st Quarter
Jana Partners' Top 5 Trades in the 1st Quarter

As of March 31, the firm's $1.48 billion equity portfolio contains eight stocks, with two new positions and a turnover ratio of 20%. The top three sectors in terms of weight are consumer defensive, health care and technology, representing 42.16%, 29.01% and 15.28% of the equity portfolio.

Jana Partners' Top 5 Trades in the 1st Quarter
Jana Partners' Top 5 Trades in the 1st Quarter

Perspecta

Jana disclosed a holding of 7,800,242 shares of Perspecta (NYSE:PRSP), down 48.97% from the December 2020 quarter holding of 15,286,875 shares. The stock ceased trading following the company's merger with private equity firm Veritas Capital's Peraton on May 6.

Jana Partners' Top 5 Trades in the 1st Quarter
Jana Partners' Top 5 Trades in the 1st Quarter

According to Peraton's website, the acquisition of the Chantilly, Virginia-based information technology company establishes the Herndon, Virginia-based company as a major mission capacity integrator and transformative enterprise information technology provider. The acquisition follows Peraton's merger earlier this year with Northrop Grumman's (NOC) integrated mission support and information technology solutions business.

Encompass Health

Jana sold 889,854 shares of Encompass Health (NYSE:EHC), axing 34.32% of the position and 4.98% of the portfolio. Shares averaged $81.98 during the first quarter; the stock is modestly overvalued based on Friday's price-to-GF Value ratio of 1.16.

Jana Partners' Top 5 Trades in the 1st Quarter
Jana Partners' Top 5 Trades in the 1st Quarter

GuruFocus ranks the Birmingham, Alabama-based health care provider's profitability 8 out of 10 on several positive investing signs, which include an operating margin and a return on equity that outperform over 80% of global competitors. Additionally, the website gives Encompass Health the business predictability rank of four stars.

Jana Partners' Top 5 Trades in the 1st Quarter
Jana Partners' Top 5 Trades in the 1st Quarter

Other gurus with holdings in Encompass Health include Vanguard Health Care Fund (Trades, Portfolio) and Steven Cohen (Trades, Portfolio)'s Point72 Asset Management.

Jana Partners' Top 5 Trades in the 1st Quarter
Jana Partners' Top 5 Trades in the 1st Quarter

Bloomin Brands

Jana sold 4,001,336 shares of Blooming Brands (NASDAQ:BLMN), freeing up 5.26% of its equity portfolio. Shares averaged $24.20 during the first quarter; the stock is significantly overvalued based on Friday's price-to-GF Value ratio of 1.87.

Jana Partners' Top 5 Trades in the 1st Quarter
Jana Partners' Top 5 Trades in the 1st Quarter

GuruFocus ranks the Tampa, Florida-based casual restaurant operator's financial strength rank of 3 on several warning signs, which include a low Piotroski F-score of 3, a weak Altman Z-score of 0.78 and debt ratios that underperform over 85% of global competitors.

Jana Partners' Top 5 Trades in the 1st Quarter
Jana Partners' Top 5 Trades in the 1st Quarter

Treehouse Foods

Jana purchased 2,118,801 shares of Treehouse Foods (NYSE:THS), boosting the stake 104.16% and the equity portfolio 7.46%. Shares averaged $47.33 during the first quarter; the stock is fairly valued based on Friday's price-to-GF Value ratio of 1.06.

Jana Partners' Top 5 Trades in the 1st Quarter
Jana Partners' Top 5 Trades in the 1st Quarter

GuruFocus ranks the Oak Brook, Illinois-based consumer packaged food company's financial strength 4 out of 10: Although the company has a solid Piotroski F-score of 6, Treehouse Foods has a weak Altman Z-score of 1.49 and interest coverage and debt ratios that underperform more than 77% of global competitors.

Jana Partners' Top 5 Trades in the 1st Quarter
Jana Partners' Top 5 Trades in the 1st Quarter

Laboratory Corp of America

Jana purchased 327,927 shares of Laboratory Corp of America (NYSE:LH), boosting the position 40.4% and the equity portfolio 5.64%. Shares averaged $233.67 during the first quarter; the stock is modestly overvalued based on Friday's price-to-GF Value ratio of 1.13.

Jana Partners' Top 5 Trades in the 1st Quarter
Jana Partners' Top 5 Trades in the 1st Quarter

GuruFocus ranks the Burlington, North Carolina-based clinical laboratory research company's profitability 9 out of 10 on several positive investing signs, which include a four-star business predictability rank, a high Piotroski F-score of 8 and an operating margin that has increased approximately 5.7% per year on average over the past five years and is outperforming over 83% of global competitors.

Jana Partners' Top 5 Trades in the 1st Quarter
Jana Partners' Top 5 Trades in the 1st Quarter

Disclosure: No positions.

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This article first appeared on GuruFocus.