ValueAct Takes Stake in KKR in 2nd Quarter

The firm also increased, reduced other positions

Author's Avatar
Sep 01, 2017
Article's Main Image

Jeff Ubben (Trades, Portfolio)’s ValueAct Holdings established a stake in KKR & Co. LP (KKR, Financial) in the second quarter.

Having handed management of the portfolio to Mason Morfit in July, Ubben remains at the firm he built as CEO but will concentrate on finding new investments and serving on boards. Taking an activist approach, the firm invests in companies that are out of favor or undergoing a transition. The firm’s current portfolio is composed of 15 stocks and is valued at $11.2 billion.

The firm purchased 5 million shares of KKR for an average price of $18.29 per share, giving it 0.83% portfolio space.

Based in New York City, the asset management company invests in multiple asset classes, including private equity, energy, infrastructure, real estate, growth equity, credit and hedge funds.

The company has a market cap of $8.93 billion; its shares were trading around $19.01 on Friday with a price-earnings (P/E) ratio of 7.89, a price-book (P/B) ratio of 1.29 and a price-sales (P/S) ratio of 1.76.

According to the Peter Lynch chart below, the stock is trading below its fair value.

1504275099357.png

GuruFocus ranked KKR’s financial strength 5 of 10 and its profitability and growth 3 of 10. The company’s trailing dividend yield is 3.47%, and its forward dividend yield is 3.58%. The dividend payout ratio is 27%.

In its second-quarter earnings report, KKR said its after-tax profit almost quadrupled to a record 89 cents per share, up from 23 cents in the year-ago quarter and above the estimates of 67 cents. In addition, the value of its private equity funds rose 7.3%. Some of its credit funds also witnessed gains. During the quarter, KKR’s assets under management grew by $10.9 million from the previous quarter to reach $148.5 billion.

Among the gurus invested in KKR, Rogers has the largest holding with 1.83% of outstanding shares. With its purchase, Ubben’s ValueAct became the company’s second-largest guru shareholder with 1.06% of outstanding shares. Chris Davis (Trades, Portfolio), Jim Simons (Trades, Portfolio), Private Capital (Trades, Portfolio), Chuck Royce (Trades, Portfolio), Tom Gayner (Trades, Portfolio), Richard Pzena (Trades, Portfolio), Pioneer Investments (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio) also own the stock.

During the quarter, the firm also added to its Seagate Technology PLC (STX, Financial) and Armstrong Flooring Inc. (AFI, Financial) positions. The Microsoft Corp. (MSFT, Financial), CBRE Group Inc. (CBG, Financial), Willis Towers Watson PLC (WLTW, Financial), Bioverativ Inc. (BIVV, Financial) and NetScout Systems Inc. (NTCT, Financial) holdings were reduced.

Disclosure: I do not own any stocks mentioned.