Jana Partners Q4 Letter Details New Stakes, Success Of Activist Positions

Activist investor and billionaire Barry Rosenstein’s JANA Partners hedge fund issued its fourth-quarter letter to investors this week. The JANA Master Fund finished up a lackluster 2017 with a 0.9-percent loss in Q4 and just a 5.6-percent overall gain on the year, well short of the 21.8-percent return of the S&P 500 Total Return Index. 

Burned By Shorts

Like many other hedge funds, JANA’s short positions fell victim to one of the best years for stocks in recent history.

“On the short side, our position shorts detracted from overall returns, but generated over 80 bps of alpha relative to a simple S&P Index hedge — so while we did not achieve our goal of making money on the short side, we did meet our goal of adding value in the form of alpha,” the letter said. 

JANA reported an 8.8-percent gross decline for its Master Fund’s short positions on the year.

Long Winners And Losers

Still, JANA had several big hits on the long side in the fourth quarter, including Tiffany & Co. TIF, HD Supply Holdings Inc HDS, Bloomin’ Brands Inc BLMN and Zimmer Biomet Holdings Inc ZBH. EQT Corporation EQT was one of the fund’s biggest losers, dropping 8.4 percent in the past three months. 

New Positions

The JANA Master Fund announced three new stock positions in the letter. First, the fund is now long Teva Pharmaceutical Industries Ltd (ADR) TEVA on optimism that new CEO Kare Schultz can deliver long-term shareholder returns. Second, the fund is now long Autodesk, Inc. ADSK and expects an inflection to positive free cash flow in 2018. Finally, the fund is long Northrop Grumman Corporation NOC based on projections for 25-percent upside to consensus 2019 earnings estimates.

Looking Ahead

JANA concluded the letter on an optimistic note, saying the hedge fund's team is excited about its prospects in 2018.

“We have a robust idea pipeline, several new value [and] catalyst positions we like very much and the team is energized by the outlook we see for our current funds and for the growth we expect in innovative new areas." 

Since its inception in 2001, the JANA Masetr Fund had produced an overall annualized return of 10.9 percent, topping the 7.2-percent annualized return of the S&P 500 Total Return Index.

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