ValueAct's Top 5 Sells in the 3rd Quarter

ValueAct Holdings LP (Trades, Portfolio), the fund founded by Jeff Ubben in 2000, revealed in November its third-quarter portfolio. The fund's top five sells in terms of portfolio impact were in Nikola Corp. (NASDAQ:NKLA), Enviva Partners LP (NYSE:EVA), Morgan Stanley (NYSE:MS), Hawaiian Electric Industries Inc. (NYSE:HE) and Strategic Education Inc. (NASDAQ:STRA).

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The San Francisco-based hedge fund concentrates on acquiring high ownership stakes in a limited number of companies that it believes are fundamentally undervalued and then pushes for changes with company management to maximize shareholder value. Ubben left the firm in June to pursue social investing, having stepped down as chief investment officer in July 2017.

As of third quarter-end, ValueAct's $7.11 billion equity portfolio contains 12 stocks, with just one new holding and a turnover ratio of 0.40%. The top two sectors in terms of weight are financial services and technology, representing 49.63% and 22.27% of the equity portfolio.

Nikola

ValueAct sold 11,675,437 shares of Nikola, knocking off 9.03% of the equity portfolio. Shares averaged $39.03 during the third quarter.

The Phoenix-based company designs and manufactures battery-electric and hydrogen-electric vehicles. According to GuruFocus, the company's cash-to-debt ratio of 188.01 outperforms 93% of global vehicles and parts companies.

Enviva Partners

ValueAct sold 4,834,867 shares of Enviva, trimming the equity portfolio 1.99%. Shares averaged $39.28 during the third quarter.

The Bethesda, Massachusetts-based company produces and supplies biomass products. GuruFocus ranks the company's profitability 5 out of 10 on the back of net margins and returns averaging close to the industry median margin and return.

Morgan Stanley

The fund sold 2.75 million shares of Morgan Stanley, trimming the stake 19.3% and the equity portfolio 1.52%. Shares averaged $50.37 during the third quarter.

GuruFocus ranks the New York-based investment bank's financial strength 3 out of 10: Although the company has a high Piotroski F-score of 8, debt ratios are underperforming over 70% of global competitors, suggesting high use of financial leverage compared to companies in other sectors.

Hawaiian Electric

The fund sold 3,246,668 shares of Hawaiian Electric, trimming the equity portfolio 1.34%. Shares averaged $35.07 during the third quarter.

GuruFocus ranks the Honolulu-based utility company's financial strength 4 out of 10 on the back of a low Altman Z-score of 1.12 and interest coverage and debt ratios averaging close to the industry median.

Strategic Education

The fund sold 591,375 shares of Strategic Education, trimming the equity portfolio 1.04%. Shares averaged $121.61 during the third quarter.

GuruFocus ranks the Herndon, Virginia-based company's financial strength and profitability 7 out of 10 on several positive investing signs, which include debt ratios outperforming over 85% of global competitors and profit margins outperforming over 70% of global education companies.

Disclosure: The author has no positions in the stocks mentioned. The mention of portfolio trades reflects information as of the September 2020 portfolio date and do not include any trades and hedges made between October and December.

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